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Decreased comfort level
#1
I have to admit that my comfort level with Pareteum is decreasing a bit due to a couple of critical articles and comments. I feel that I can't entirely ignore these criticisms and we think investors in general should not ignore other opinions of their stock, even if they're completely the opposite of one's own opinion.

Here is some of the stuff I'm uncomfortable with as I don't have ready answers and can't argue these away:
  1. While most of the customers who signed up are not known by name, there seem to be some questionable companies in those that are known. As a result, we can't exclude the possibility that the backlog number ($933M per this morning) could be overly aggressive and there seems to be at least some recognition from management as they guide 2019 at 75%-80% conversion, not their historic 100%.
  2. The previous history of their CFO appears to have some problems.
  3. The fact that competitor Twilio needs a much higher level of OpEx, providing the CPaaS services seems to require more manpower at Twilio than at Pareteum. Despite doubling revenue, operating cost haven't increased all that much at Pareteum last year. While I previously considered that a sign of potential great operating leverage, it's odd that this isn't visible in a much larger competitor.
Keep in mind that the fact that we can't answer these doesn't necessarily mean that they don't have satisfying answers.

In case you think I'm changing my mind 180 degrees and turned into a short, no. There are a number of positives that stand quite solidly and are difficult to deny, like:
  1. The whole CPaaS sector is growing fast.
  2. Organic revenue growth of 101% in 2018.
  3. Management guided 2018 revenue very conservatively (50%+ growth), curious for a management that is accused of being very aggressive.
  4. Having Vodafone as its biggest customer, good for 40% of revenue.
  5. The recent deal with Citrix, indicating iPass (which was ailing prior to the acquisition) business can be revived.
  6. The 12M shares in bought by Hoving Partners, Swiss wealth management managed by a former non executive Artilium director.
Longs can take comfort in these six facts. 
Whatever exactly the reality is, sentiment seems to have turned as the stock seems to be unable to rally further on good news. I realize people might even get angry at me for writing this, but I feel one should be as open as possible to conflicting information and alternative readings of the facts and I feel I have a duty my followers to also point out potential pitfalls. We should at least discuss these things open, here.
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#2
And here is another item we can't really answer (our emphasis):

Quote:The last time Pareteum broke out the backlog by year was in their AGM presentation in September. It was $375 million at the time. Here it is:
[Image: 365869-15527583519096642.jpg]
What is curious about this table is that the 2019 revenue backlog is $84 million. At a glance that makes sense – the guide was higher than that after all. But wait, Pareteum has made two acquisitions that are included in guidance. This backlog should be for pre-acquisition Pareteum as neither acquisition was closed. What’s more, Pareteum has added more than $200 million to the backlog since that time. One would think some of that would fall into 2019. If we take the SEC projections for iPass and Artilium at face value, the 2019 guidance is only forecasting $15 million to $25 million for stand-alone Pareteum. How does that align with this massive backlog? It’s actually lower revenue than stand-alone Pareteum had in 2018. Again, I’m left wondering how to make the numbers work..
THE AMAZING CHART I JUST CAN'T BUY---PARETEUM: TEUM-NASD - Oil and Gas Investments Bulletin | Seeking Alpha

So the conundrum is that:
  • Company guidance for 2019 revenue is $105M-$115M (which was already lower by quite a bit compared to the November iPass presentation where they had this at $144M, the difference being 80% versus 100% conversion).
  • But on the AGM in August last year, they guided backlog at $84M for 2019, supposedly excluding Artilium and iPass (which together were guided at nearly $75M in revenues before the acquisition, $43.3M for iPass and $31.6M for Artilium).
  • It's not as bad as the author of above article claims, stand alone Pareteum (ex Artilium and iPass) revenue is $30M-$40M, not the $15M-$25M the author claims, but that's still much less than the $84M of backlog it supposedly has in 2019 (and probably more as backlog has since grown considerably). This suggest a conversion rate well below 50%. We will know a lot more when we have the Q1 numbers, but this isn't increasing my confidence..
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#3
(04-10-2019, 02:05 AM)admin Wrote: I have to admit that my comfort level with Pareteum is decreasing a bit due to a couple of critical articles and comments. I feel that I can't entirely ignore these criticisms and we think investors in general should not ignore other opinions of their stock, even if they're completely the opposite of one's own opinion.

Here is some of the stuff I'm uncomfortable with as I don't have ready answers and can't argue these away:
  1. While most of the customers who signed up are not known by name, there seem to be some questionable companies in those that are known. As a result, we can't exclude the possibility that the backlog number ($933M per this morning) could be overly aggressive and there seems to be at least some recognition from management as they guide 2019 at 75%-80% conversion, not their historic 100%.
  2. The previous history of their CFO appears to have some problems.
  3. The fact that competitor Twilio needs a much higher level of OpEx, providing the CPaaS services seems to require more manpower at Twilio than at Pareteum. Despite doubling revenue, operating cost haven't increased all that much at Pareteum last year. While I previously considered that a sign of potential great operating leverage, it's odd that this isn't visible in a much larger competitor.
Keep in mind that the fact that we can't answer these doesn't necessarily mean that they don't have satisfying answers.

In case you think I'm changing my mind 180 degrees and turned into a short, no. There are a number of positives that stand quite solidly and are difficult to deny, like:
  1. The whole CPaaS sector is growing fast.
  2. Organic revenue growth of 101% in 2018.
  3. Management guided 2018 revenue very conservatively (50%+ growth), curious for a management that is accused of being very aggressive.
  4. Having Vodafone as its biggest customer, good for 40% of revenue.
  5. The recent deal with Citrix, indicating iPass (which was ailing prior to the acquisition) business can be revived.
  6. The 12M shares in bought by Hoving Partners, Swiss wealth management managed by a former non executive Artilium director.
Longs can take comfort in these six facts. 
Whatever exactly the reality is, sentiment seems to have turned as the stock seems to be unable to rally further on good news. I realize people might even get angry at me for writing this, but I feel one should be as open as possible to conflicting information and alternative readings of the facts and I feel I have a duty my followers to also point out potential pitfalls. We should at least discuss these things open, here.
Admin,
I hear your concerns and positives, let me do my best to respond to a couple of yours and mine concerns.  BTW, I am a long time, way over due bag holder of ETAK/TEUM, avg down after RS to $1.86 with approx 100K shares.

Concern 1: I am happy to see and know from my own calculations that Hal and TEUM has, I would say conservatively, baked in the backlog conversion of 75-80% for 2019 rev targets $105m-$115M. As well all know, 100% is impossible to achieve but with this float, they can manage the over and under revenue actuals buy customer.  
Concern 2: Major concern of mine. I knew of TEd from a previous disaster of a stock call AUGT/HIPP which went belly up a couple years back and I dont trust Ted as far as I can throw him.  I believe in second chances but it seems trouble follows Ted around.. Google him..
Concern 3: comparing TWLO to TEAm is like comparing Apples to Oranges from a technical standpoint.  yes they are in the same Industry, but their back-end platforms are very different.  (TWLO is "heavy" to run, analogy I like to use is like running SAP - ERP and TEAM is very light to run, like SFDC) So with this the supporting infrastructure and resource load can be significantly reduced under the TEUM model.. 

Bottom line is the "proof is in the pudding" as the next couple Quarters rev results and backlog conversion is critical to mkt trust.

All the best,
KI
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#4
Thanks, appreciated and welcome aboard Turbo.
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#5
It didn't take much to change your mind, apparently, but I guess thanks for letting us know, sort off..
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#6
Surprised you got scared out that quickly. So you give more credibility to some bloggers than you do to 3 or 4 analysts
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#7
(04-10-2019, 05:57 AM)Patc Wrote: Surprised you got scared out that quickly.  So you give more credibility to some bloggers than you do to 3 or 4 analysts

It's not that I give more credibility to this one or that one, it's that they raise issues which I can't immediately address, especially when there are a number of these. I simply can't guarantee that there is nothing wrong with their backlog numbers, which increased a level of discomfort surpassing a threshold. 

Apart from that, the stock didn't rally on this morning's news, which was another sign to take at least some profit, IMHO. The real story will come out in the Q1 figures.
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#8
Thank you SHU. I had admired and appreciated you and your works. And because of this frank concern of TEUM, I admire and appreciate you more. I only wish you could do this in one of your articles on SeekingAlpha.
Sincerely,
Vincehap
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#9
(04-10-2019, 06:17 AM)Vincehap Wrote: Thank you SHU. I had admired and appreciated you and your works. And because of this frank concern of TEUM, I admire and appreciate you more. I only wish you could do this in one of your articles on SeekingAlpha.
Sincerely,
Vincehap

Thanks, appreciated. Well, an SA article takes time, then it spends like 24 hours with the editors (this is no dig at SA, they are overwhelmed by articles), and I actually don't really have much more to say than the above.
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#10
I don't have a lot of the investment knowledge as many on this site so perhaps I may be wrong because my understanding may not be as strong as some. The stock was at 3.91 on March 12th the day before earnings peaked on March 18th at 5.93 and now is at 4.35 which isn't much above when we got last audited numbers. I have concerns like others but the price isn't much higher than at last earnings so to me it appears most if not all the concerns are already baked into the price.
I can understand some profit taking on the concerns from those who have a lot of profit already. I also understand SHU's concerns as he has written a number of positive articles about the stock so I see why he would want to express both positives and negatives he sees.
I'm staying Long TEUM at this time.
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