2019 revenue

[admin]

A bit of a riddle. Here is pro-forma 2018 revenue:

• Pareteum ($4M+$6M+$8M+$10M) = $28M (estimating $10M for Q4).
• Artilium produced 16.25M euro in revenue for their fiscal year ending in June 2018 (up from 10M euro the previous fiscal year, with the increase mostly due to the acquisition of IDM). Given the growth and the exchange rate, calendar year 2018 revenues are likely to be $18M-19M.
• iPass 2018 revenues (which are actually declining due to their corporate legacy business) is roughly $40M (see below).

That is, pro-forma 2018 revenue for the companies combined is likely to be in the order of $85M. The acquisition presentation from November 2018 on the iPass acquisition has it at $92M.

So with $85M as the 2018 base case, what will 2019 revenues be? 

On average, 15% of backlog is converted into revenues in the first year of contract. For the sake of being conservative, lets make that 10%, that's still over $60M suggesting revenues this year could easily reach $145M.

Keep in mind that the official number is lower as the iPass acquisition closed in the third week of February.

This is also in the same ballpark the 2019 estimate management gave ($144M) for 2019 revenues in their presentation when they announced their intention to acquire iPass.

So we roughly arrive at $145M for this year (on a pro-forma basis, officially it's a little lower due to iPass joining in the third week of Februari).

Now there is something curious:

• Taglich Brothers project curiously low revenues of $113M
• From what we remember from Northland, they're in the same ballpark as Taglich Brothers.

How come they're so much lower, anyone any suggestions?

[Cann]

It's a curious difference, admin. It's hard to see where your 2018 revenue estimate is off, given that this should be known already at least for the first three quarters. Could be off by a few million, but not by much.

That leaves that 10% of backlog as perhaps to aggressive, but given 15% ballpark figure management gave for first year revenue from producing contracts, that doesn't seem aggressive at first sight.

Curious!

[Cann]

It looks like if your $145M revenue for this year materializes, the stock is really undervalued at just 2.5x sales..

In fact, even if it's "just" $110M or so, the shares trade at 3.5x sales, that's still very cheap for a SaaS platform..

[admin]

It looks like if your $145M revenue for this year materializes, the stock is really undervalued at just 2.5x sales..

In fact, even if it's "just" $110M or so, the shares trade at 3.5x sales, that's still very cheap for a SaaS platform..

Yes, it's certainly much cheaper than other SaaS platform companies I've seen and this valuation discount will gradually disappear with the company more known and established.

That is, shareholders can benefit both from the growth of the company and valuation multiple expansion...

[admin]

Well, I just posted the previous entry half an hour ago or so, it looks like the analyst from Lake Side agrees:

We believe over 129% MRQ y/y sales growth provides evidence the nearly $400M 36 month contractual backlog is a matter of when, not if. As backlog is converted, the recurring revenue stream grows and profitability improves, we predict multiple expansion and accelerated sales will drive this stock higher.

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Accelerated sales and multiple expansion.. exactly.

Mind you, that backlog has already grown to $664M at the end of January 2019.

[admin]

From Lake Side (November 19, 2018 report)

Our $6 price target flows from a 4.3x EV/2020 revenue multiple. The math works out to 4.3x $160M (our existing $120M FY20 revenue + $40M for IPAS) , plus $3.7M net cash, divided by 114.1M shares outstanding, post-close.

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They have:

• 2018 revenue at $31.6M (including just Q4 from Artilium and nothing for iPass)
• 2019 revenue at $80M
• 2020 revenue at $160M (including $40M from iPass)

It's odd that they don't include anything for iPass in their 2019 revenue guidance, which only misses the first six weeks of 2019 as an acquired Pareteum company so they should have included 90% of their $40M revenue estimate for iPass in 2019, arriving at $116M.

They also estimate Artilium's 2018 revenue at $25M and Pareteum's 2018 revenue (without Artilium) at $27M. We had Artilium's revenue quite a bit lower in the first entry of this thread (at $18M).

So the pro-forma Pareteum-Artilium-iPass revenue for 2018 is indeed the $92 which was mentioned in the iPass acquisition investor presentation.

And the 2019 pro-forma Pareteum-Artilium-iPass revenue should be at least $92M, plus whatever growth they manage to produce converting backlog into revenues. It looks like our $145 estimate (based on a 10% conversion of backlog) might be a bit aggressive, but not by much as this $92M base figure (the combination of all revenue generated by Pareteum, Artilium and iPass in 2018) seems pretty well established.