Q4 2018 Results

[admin]

Pareteum Announces Fourth Quarter and Full Year 2018 Financial Results

Q4 Revenue Growth of 256% and FY 139%

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

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NEWS PROVIDED BY

Pareteum Corporation 

Mar 12, 2019, 16:01 ET

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NEW YORK, March 12, 2019 /PRNewswire/ -- Pareteum Corporation (Nasdaq: TEUM), a rapidly growing global cloud software communications platform company with a mission to connect every person and every(thing)™, today announced operating and financial results for the fourth quarter and full year ended December 31, 2018.

"2018 was a record year for Pareteum, achieving over 139% year-over-year revenue growth driven by the effectiveness of our cloud-based platform, innovative product solutions, employee talent and leading customers. In fourth quarter of 2018, we reported 256% year-over-year revenue growth, which included the first full quarter of our accretive Artilium acquisition," commented Hal Turner, Pareteum's Founder, Executive Chairman and Principal Executive Officer. "We are extremely pleased with Pareteum's significant results in 2018 which are attributed to our TEUM's laser focus on sales expansion and operational improvements. Looking ahead to 2019, we are very excited about the tremendous opportunities for Pareteum given the strong industry dynamics; our visibility into future revenue from our 36 Month Contractual Revenue Backlog; and, the augmented talent, product, services, network expansion and productivity improvements implicit from our strategic acquisitions."

FOURTH QUARTER 2018 FINANCIAL RESULTS:

(Unless otherwise noted, all comparisons are made to the fourth quarter of 2017)

• Total revenues increased 256% to $14.3 million
• In December of 2018 our Global Software Defined Cloud (GSDC) revenue was 51% of our total revenue, with 35% in Managed Services (MSP) revenues, and Super API of 14%
• Adjusted EBITDA increased 82% to $2.34 million
• Non-GAAP EPS of $0.02 cents
• Artilium financials are fully consolidated and accretive in Pareteum's fourth quarter results
• Net Dollar-based expansion rate represented 214% growth

FULL YEAR 2018 FINANCIAL RESULTS:

(Unless otherwise noted, all comparisons are made to full year of 2017)

• Revenues increased 139% to $32.4 million
• Adjusted EBITDA improved 199% year-over-year to $6.4 million
• Non-GAAP EPS of $0.09 cents compared to $0.05 cents for year ending 2017
• We ended the year with a $6.1 million cash balance and no secured debt

KEY 2018 OPERATIONAL METRICS:

• 36-month Contractual Revenue Backlog quadrupled to $615 millionfor the full year 2018, up from $147 million in 2017 with a conversion rate to revenue of 100%
• Connections increased 252% to 4,609,000 for the full year 2018, and grew 59% sequentially in the fourth quarter of 2018
• Fourth quarter average annualized revenue per employee of $415,000, an improvement of 78% year-over-year

We expect revenue to be between $105 million and $115 million for the full year of 2019. Adjusted EBITDA and Cash Flow, net of restructuring and acquisition costs will be positive for the year.

We are expecting 2019 revenue growth in the range of 225% to 260% year-over-year, outpacing the market growth rate fivefold to be updated quarterly

[admin]

Well the revenue guidance is $105M-$115M, the more conservative of our three scenario's, the analysts apparently were pretty on the mark (at least those that included the iPass acquisition).

Keep in mind that for 2018, they guided revenue growth as "50%+" and this turned out to be 139% (with the help of one quarter of Artilium revenues, but even without these growth would have been well over 100%).

[admin]

So far so good:

• Dollar net retention rate of 214%, that is, customers on average more than double their first contract.
• Revenue guidance $105M-$115M, that is, the shares are selling at less than 4x sales.
• non-GAAP 2018 EPS of $0.09, that's a bit of a surprise. No 2019 EPS guidance, but they might be able to improve that quite a bit.
• Here is why: Q4 revenue per employee was a whopping $415K, up 78% y/y despite Artilium acquisition. There is terrific leverage in the operating model.

That is, this could actually become an earnings story a little sooner than we assumed..

[Mrebs]

Also two notes that they said during the CC.
-Their backlog tracker currently has them at 150M backlog to revs for 2019 if they continue 100% conversion rate. They went with 80% conversion rate for forward guidance numbers which is why we are only seeing 105-115M.
-They also stated that with IPAS combined their back log is now over 800M!

[stpioc]

Also two notes that they said during the CC.

-Their backlog tracker currently has them at 150M backlog to revs for 2019 if they continue 100% conversion rate. They went with 80% conversion rate for forward guidance numbers which is why we are only seeing 105-115M.

-They also stated that with IPAS combined their back log is now over 800M!

Yes, I just also noticed the first, thanks, that makes quite a bit of difference. So far they have been able to produce 100% conversion, so there is significant upside to that $105M-$115M guidance. iPass backlog, hmm.

[admin]

So we have:

• 2019 rev guidance at $105M-$115M (80% conversion) or $150M (100% conversion)
• Backlog now $800M including iPass
• Dollar net retention rate of 214%, that is, customers on average more than double their first contract.
• non-GAAP 2018 EPS of $0.09, that's a bit of a surprise. No 2019 EPS guidance, but they might be able to improve that quite a bit.
• Here is why: Q4 revenue per employee was a whopping $415K, up 78% y/y despite Artilium acquisition. There is terrific leverage in the operating model.
• The shares are selling at 4x 2019 sales (80% backlog conversion) or 3x (100% conversion).
• In 2018, the company was able to convert 100% of backlog..

No wonder we're up AH..

[Cann]

Thanks for that summary, so the funny thing is, even after an epic rally, the shares are still really modestly priced at 3x-4x 2019 sales. When the company gets more established that valuation multiple is likely to rise quite a bit..

[admin]

Here is a new powerpoint presentation made after the Q4 results, we highlight the following slide, which doesn't even include the iPass acquisition yet, just the 2018 improvements (including Q4 of Artilium):