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Stylized facts
#1
Stylized facts are facts which are supported by the weight of existing evidence. These are subject to change when new evidence appears (or when one becomes aware of its existence). In case of Pareteum:

Evidence pertaining revenues:
  • Grew 101% organically last year, audited
  • Guided only at 50%+, turned out to be very conservative guidance
  • Hoving Partners with 12M shares run by ex-insider
  • Whole sector is growing fast, 100% growth isn't all that strange
Evidence pertaining backlog
  • Considerable inconsistencies in their own reporting
  • AVG presentation, guided $84M backlog for 2019, should be considerably more now as backlog has more than doubled since than. This seems inconsistent with their last revenue guidance ($105M-$115M) as much of that ($89.7M per the acquisition filings) is from Artilium and iPass, leaving only $15M-$25M for legacy Pareteum, which sits odd with the $84M backlog.
  • Management guided $144M in revenues in the iPass acquisition presentation but this was lowered to $105M-$115M in their Q4CC, basically as they moved from 100% conversion to 75%-80% conversion.
  • The examples of some of the companies that signed contract and are responsible for the backlog as reported by the article from the Oil & Gas Investor Bulletin.
  • The company raking in $938M in backlog with a tiny sales force. 
That is, we think the revenue numbers are real but the backlog numbers are inflated. Whether you agree with the latter is up to you, as is how serious an issue it is.
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#2
And here is another reason why we wrote what we wrote:

Quote:Defense is 10 times more important than offense. You have to be very focused on protecting the downside at all times. These are the wise words of hedge fund manager Paul Tudor Jones. His mantra seems a bit counterintuitive, considering an enviable track record that has made him best known for delivering outsized returns over the past four decades.

Why Investors Should Obsess Over Risk, Not Returns | Seeking Alpha

Obsessing over risk, rather than returns. Or at the minimum, not be blind to them or arguing them away.
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#3
Here is another way of looking at it: I'm actually not saying anything new. The fact that no long is defending their backlog numbers shows that I'm saying out loud which what most already know anyway. 

For instance, the company guided 2019 revenues at $144M in November in the iPass acquisition presentation and that came down to $105M-$115M during the Q4CC whilst in between, backlog has almost doubled in-between.

The explanation they gave for that is that conversion moved from 100% to 75%-80%, basically not even management has faith in their own backlog numbers. 

The question really is by how much these backlog numbers are overstated. They have a substantial margin here, which is somewhat reassuring. That is, you can cut backlog in half and the company would still grow revenues substantially, which is indeed what they've been doing.

But how comfortable are investors with a management that is so aggressive with these numbers?
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#4
(04-12-2019, 11:14 PM)admin Wrote: Here is another way of looking at it: I'm actually not saying anything new. The fact that no long is defending their backlog numbers shows that I'm saying out loud which what most already know anyway. 

For instance, the company guided 2019 revenues at $144M in November in the iPass acquisition presentation and that came down to $105M-$115M during the Q4CC whilst in between, backlog has almost doubled in-between.

The explanation they gave for that is that conversion moved from 100% to 75%-80%, basically not even management has faith in their own backlog numbers. 

The question really is by how much these backlog numbers are overstated. They have a substantial margin here, which is somewhat reassuring. That is, you can cut backlog in half and the company would still grow revenues substantially, which is indeed what they've been doing.

But how comfortable are investors with a management that is so aggressive with these numbers?

Aggressive, I think that is a very bold statement especially when TEUM has been over delivering for the past 5 Qs now.  I for one, am very pleased to see that they have taken a more conservative approach to the backlog conversion as nothing we do in biz is 100%, especially SaaS modeling software.  This is the very reason for the new 606 accounting principals.  Back to my point, you are being overly critical of the backlog especially when TEUM has not undelivered to the street and/or analysts expectations.
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#5
I think you brush the fact that over a time when backlog basically doubled, they really materially declined revenue guidance by tens of millions of dollars all to easily under the carpet.

Take the following stylized facts:
  • The $105M-$115M 2019 guidance implies something like $40M for Pareteum without the acquisitions
  • In September, management guided 2019 backlog at $84 so even on these old numbers the conversion rate would be less than 50%. But backlog has doubled since September, surely 2019 backlog (they don't split this out anymore) is also considerably higher, which would make the conversion rate considerably lower.
  • Backlog now stands at $938M, almost all of this is legacy Pareteum. 15% of that would be well over $100M. No, one could retort, it takes 90 days to sign customers op, we're already in April. Yes, but on the other hand, backlog keeps growing... 
  • Even if you take 15% of the end of 2018 figure ($615M) that's still almost $100M.
  • There was a reason we thought that 2019 revenue would be $150M+..
Whichever way I look at it, there is a growing disconnect between backlog and revenue, unless they massively exceed their own revenue guidance. I don't exclude that possibility, but no analyst is predicting that.

I still see good growth, but I also see a few dodgy customers (of the few we know of) and a seemingly growing disconnect between revenue and backlog. I'm simply concerned and have to little data to make any firm determinations one way or another.
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#6
(04-17-2019, 09:33 AM)TurboTime Wrote:
(04-12-2019, 11:14 PM)admin Wrote: Here is another way of looking at it: I'm actually not saying anything new. The fact that no long is defending their backlog numbers shows that I'm saying out loud which what most already know anyway. 

For instance, the company guided 2019 revenues at $144M in November in the iPass acquisition presentation and that came down to $105M-$115M during the Q4CC whilst in between, backlog has almost doubled in-between.

The explanation they gave for that is that conversion moved from 100% to 75%-80%, basically not even management has faith in their own backlog numbers. 

The question really is by how much these backlog numbers are overstated. They have a substantial margin here, which is somewhat reassuring. That is, you can cut backlog in half and the company would still grow revenues substantially, which is indeed what they've been doing.

But how comfortable are investors with a management that is so aggressive with these numbers?

Aggressive, I think that is a very bold statement especially when TEUM has been over delivering for the past 5 Qs now.  I for one, am very pleased to see that they have taken a more conservative approach to the backlog conversion as nothing we do in biz is 100%, especially SaaS modeling software.  This is the very reason for the new 606 accounting principals.  Back to my point, you are being overly critical of the backlog especially when TEUM has not undelivered to the street and/or analysts expectations.

Well, I am no bear, but TEUM's management is stunningly aggressive, what kind on managemet sets out a $25 share price target in the 3QCC (x10 in that time) if not an aggrissive kind?
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#7
(04-18-2019, 06:10 AM)Daxcoppinger Wrote: Well, I am no bear, but TEUM's management is stunningly aggressive, what kind on managemet sets out a $25 share price target in the 3QCC (x10 in that time) if not an aggrissive kind?

Yes, that was quite aggressive although I put it down as a bit of a loose remark. As a matter of fact, it is still possible if they indeed keep revenue growing at 40%-50% and become profitable. While we previously thought this was more than likely, there are a few more question marks appearing now so we need to see two or three quarters of results before we might become as convinced as we were.
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#8
Turns out one of the companies that The Oil & Gas Trader Bulletin had flagged as dodgy isn't dodgy. We should have checked that, so mea culpa for that.

The company in question is ACM Europe and while we don't know whether it can be responsible for the $50M in backlog that was penciled in in that backlog PR, it's certainly a company of sufficient heft and there is nothing dodgy about it. 

Our questions with regard to exploding backlog while significantly dialing down revenue guidance remains, but we're no longer all that worried about potentially dodgy customers.
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#9
(04-24-2019, 12:33 AM)admin Wrote: Turns out one of the companies that The Oil & Gas Trader Bulletin had flagged as dodgy isn't dodgy. We should have checked that, so mea culpa for that.

The company in question is ACM Europe and while we don't know whether it can be responsible for the $50M in backlog that was penciled in in that backlog PR, it's certainly a company of sufficient heft and there is nothing dodgy about it. 

Our questions with regard to exploding backlog while significantly dialing down revenue guidance remains, but we're no longer all that worried about potentially dodgy customers.

I saw that as well, ACM, and laughed as I personally know the Cupisz twins very well.  And to your point, it is "a company of sufficient heft" and I look for this relationship to materialize significantly.  Im sure, at the end of the day, Hal will fully address the concerns floating around backlog/conversion Revs on May 7th.
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#10
Yes, I overlooked it as the other companies mentioned in the Oil&Gas trader article did look quite improbable bringing in tens of millions of revenues and I don't know the Oil&Gas trader as a BS artist (neither Alex). But I should have checked nevertheless, so mea culpa.
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