Pareteum Corporation
Q3 2018 Earnings Call Transcript

Published: 10 Nov 2018

[Operator:]

Good day and welcome to the Pareteum Third Quarter 2018 Earnings Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Stephen Hart, Investor Relations. Please go ahead sir.

[Stephen Hart:]

Thank you, Lauren, and good afternoon, everyone. Thank you for joining us today for Pareteum Corporation’s third quarter ended September 30, 2018 earnings results, analyst and investor conference call. With us today are Hal Turner, Pareteum’s Founder, Executive Chairman and Principal Executive Officer; Vic Bozzo, Chief Executive Officer of Asia and Chief Executive Officer of the Company; Rob Mumby, Chief Revenue Officer; Ali Davachi, Chief Technology Officer; Denis McCarthy, President; Ted O’Donnell, Chief Financial Officer; and Amy Love, Chief Marketing Officer. Earlier today, Pareteum released financial results for the quarter ended September 30, 2018. If you have not yet received Pareteum’s earnings release, please visit Pareteum’s Investors page at pareteum.com. Following management’s discussion, there will be a Q&A session. During the course of this conference call, the Company will be making forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. The Company cautions you that any statements that is not a statement of historical fact is a forward-looking statement. This includes any projections of earnings, revenues, cash or other statements relating to the Company’s future financial results. Any statements about plans, strategies or objectives of management for future operations, any statements concerning proposed new products, any statements regarding anticipated new relationships or agreements, any statements regarding expectations for the success of the Company’s products in the U.S. and international markets, any statements regarding future economic conditions or performance, statements of belief and any statements of assumptions underlying any of the foregoing. These statements are based on expectations and assumptions as of the date of this conference call and are subject to numerous risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Some of these risks are described in the section of today’s press release titled Forward-Looking Statements and in the public periodic reports that the Company files with the Securities and Exchange Commission. Investors or potential investors should read these risks. Pareteum assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. With that, I would like to turn the call over to Mr. Hal Turner, Pareteum’s Principal Executive Officer. Hal?

[Hal Turner:]

Stephen, thank you very much. And let me add my greetings to everyone who’s joining us today from wherever you are around the world today. I want to start out by just simply saying our business is in excellent fundamental shape for its stage of growth. We’ve got some really good news. So, let’s get to it. There are several strong points to highlight for Q3, and the way we are going to do this today is I am going to go through a few of the highlights and a few other points that we think are very important, then Denis is going to go into a more in-depth financial results, and then we’re going to open it up to Q&A because we think you’ll have a lot of good questions to ask. So, with the several strong points to highlight for Q3, our Pareteum revenues are $8 million. This performance is a 129% growth over the same quarter in 2017, and that has moved us from $3.5 million per quarter up to $8 million a quarter; that’s a 233% growth over the last eight quarters where we’ve moved from $2.4 million to $8 million, and it’s a 33% quarter-over-quarter, advancing from $6 million, which in and of itself was a record quarter to $8 million. This represents a standalone annual revenue run rate at this point of $32 million, which excludes the Artilium acquisition. Our continued improvement in adjusted EBITDA showed a growth quarter-over-quarter from $1.3 million to $1.8 million. For the quarter ending September 30, 2018, our non-GAAP earnings of $600,000 equated into non-GAAP earnings per share of one penny. For the nine months ended September 30, 2018, our non-GAAP earnings of $2 million represented non-GAAP earnings per share of $0.02. In addition to these very strong items, I’d like to highlight to you some selected successes that we’ve had in our business and that have continued throughout the third quarter and certainly going forward we expect. From July through the end of October, we won 27 new contracts, which added $112 million to our 36-month contractual revenue backlog. Additionally, we experienced growth of $72 million from existing contracts, people are buying more, and $40 million from the Artilium acquisition; that brings us to the $500 million 36-month contract revenue backlog as of October 30, and that excludes monthly recurring revenue from Artilium acquisitions for customers that are not under contract. By the way, in our minds, by any possible stretch of the imagination, this is and was the metaphorical opening of the floodgates by Rob Mumby and his sales team that produced $500 million in contracts. I think you’ll recall that at the end of 2016, our backlog stood at $40 million; at the end of 2017, it was $147 million; and now, year-to date through 2018, it’s $500 million. That’s 1,150% increase and that’s coupled with the corresponding 233% in quarterly revenue. This is our definition of opening the floodgates. We expect to continue our growth, given our Pareteum history of overachievement, and we’re going to do that by continuing to sign new contracts across the globe and as we convert showcase opportunities, many of which have come to us from our Artilium acquisition. We will do this also by maintaining our scheduled implementations at 100% for the 36-month contract revenue backlog conversions and also improving our best-in-class performance for dollar-based net expansion rate, which currently stands at 147%. We ended the quarter -- third quarter, with 2,903,000 connections, our devices and people connected to our connectivity capabilities. That’s an increase of 127% over the end of the third quarter for 2017 and a 7% sequential quarter increase. Now, with the addition of Artilium, we have over 4,400,000 connections through our global connectivity network, which has always grown and currently stands at 64 million Wi-Fi hotspots with 180 plus countries connected, 1,000-plus GSM and 200-plus CDMA SMS global agreements for texting and 59 mobile network agreements in 80 countries. With that, I’d like to pause and now recognize Denis McCarthy, who will go into some of the details of our major financial highlights during the third quarter. Denis?

[Denis McCarthy:]

Thank you, very much, Hal, and good afternoon to everybody on the phone as well. I would like to take you through some of our key financial measures for the third quarter. As Hal mentioned, we generated adjusted EBITDA of $1.8 million in the quarter, which represents 23% of revenue. Our adjustments to EBITDA include stock-based compensation of $5.6 million, and acquisition and restructuring related costs of $2 million. The majority of stock-based compensation is one-time and non-recurring in nature, as are all of the acquisition and restructuring costs. As Hal mentioned, we generated non-GAAP earnings of $600,000 or $0.01 per share; and $2 million or $0.02 per share for the three months and nine months ended September 30, 2018. We believe this is a reflection of the continued strength of our core business and a testament to both our sales and operation teams. In addition to the previously mentioned top growth of $8 million, we’ve been able to maintain margins in excess of 70%. During the third quarter, our margin improved to 73% over the prior quarter. Pareteum has also overachieved on consensus analyst expectations as follows

[Hal Turner:]

Denis, thank you very much. Good financial results for certain. We are expanding into new markets, and our leadership is therefore expanding. As Denis said, we are a growth Company. Bart Weijermars who is now CEO of Pareteum EMEA, Europe, Middle East and Africa, certainly joined us as part of the acquisition of Artilium. By the way, Bart could not join us today. We’re very sorry for that but I assure you he is -- will be listening. Denis McCarthy who you just heard was formerly our Senior Vice President of Corporate Development; we’ve named him and promoted him to President of the Company. And in doing this, Denis will lead not only our growth strategies alongside me but as well our corporate staff and financial and human resource and M&A functions. It’s Denis’ professional guidance we expect to accelerate our strategic plans and create more alliances as we are expanding our ecosystem. Amy Love has joined us as our first ever Chief Marketing Officer, and she’s got a big job ahead of her to call us, particularly as we integrate the marketing communications for everything across the globe with the acquisition of Artilium. She’ll do this through not only marketing communication plans and programs, but digital marketing and product marketing messages. Pareteum has expanded into Asia. You may know that on Monday, we named Vic Bozzo as CEO of Asia. This is an additional assignment to his already very broad mandate. The appointment follows the decision of Manjot Mann who we hold in high regard to join one of our key Singapore-based customer target opportunities by becoming CEO of M1 in Singapore. We wish Mann very best as he takes up his new role, which will began on the 6th of December. Mann has made plans with Vic, who will certainly manage the transition to continue our working relationship through his new company, the same as we did before Mann officially joined us as he was transitioning and departing from Lebara following its private equity sale. I am personally very comforted by Vic’s acceptance of this new additional role, and we think that he’s got the opportunity along with all the other teammates to really make a greenfield opportunity into a material results contributor for the Company. The comfort I have in Vic doing this job is underwritten by the superior sales leadership and results being produced by Rob Mumby and his excellent sales team. And we are seeing clearly the service delivery and platform development from Ali Davachi and that team which is underlying our ability to deliver. We’ve also grown our presence in the Americas with new executive additions. David Hess has joined us and David John has joined us. And we are very much looking forward to their leadership in North America and Latin America, respectively. Now, more than ever, we are a team of teams, and it’s a growth team. I’d like to turn now to our guidance for 2018. Pareteum is raising its guidance and this is as follows

[Operator:]

[Operator Instructions] Our first question from the Eric Martinuzzi with Lake Street Capital Markets.

[Eric Martinuzzi:]

Thanks. Congratulate to you and the team Hal, but I think 129% organic revenue growth is the one that I’m going to highlight. So, congrats on that. Let me shift over to…

[Hal Turner:]

Thank you very much, Eric.

[Eric Martinuzzi:]

Yes. You’re welcome. Let me shift over to understanding the Q4 revenue guide. I do appreciate the color there, you talked about the combined Artilium, Pareteum guide of 13 million to 14 million. I just want to peel that back a little bit. If I just look at our organic business, are we assuming a sequential growth in the legacy business from Q3 to Q4.

[Hal Turner:]

Yes, we are. And you can clearly see that if you look at our standalone 36-month contract revenue backlog slide that appears in our presentation on the web. But clearly, that is a sequential increase over the 8 million and it does include proportional amounts that were available to us from Artilium.

[Eric Martinuzzi:]

You talked in the press release about increase in inbound requests, I think this has got to be a salesman’s or saleswoman dream scenario where the phone actually rings and you don’t have to pound the payment or send the phone call the other way. What do you think are the major points that are driving that?

[Hal Turner:]

There are couple of those. I’m just going to hit one or two, and then I’m going to yield over to Rob Mumby, and Amy for their comments on this. The first thing that we see driving this is just an overall increase in mobility and the need for applications to be driven through mobility and therefore mobile virtual network operators coming into space. What is happening is, through search engine optimization, we are very fortunately adhering near the top of the readings and the rankings, and are getting a lot of over the transom calls on that. So, that’s what I would comment. Let me go next to Rob Mumby to see if he has color on that please.

[Rob Mumby:]

Just a couple additional comments. First I would say that education in the market is there are options outside of traditional mobile services provided by MNOs is one. Second is the MNOs understanding that they need to adhere to what the market wants and use our platform to have the flexibility to do so. And finally, I think the evolution of new application and IoT in particular are driving the need for solutions platform like Pareteum. So, I think that’s where why we’re going to do a lot of inbound. And you’re exactly right, that’s the sales team’s dream.

[Hal Turner:]

Amy, did you wish to add anything? Okay…

[Amy Love:]

I agree, just confirming Rob. Thank you.

[Eric Martinuzzi:]

Okay. Let me shift over to the expected mix here. You’re seeing what you’ve been telling us you would see, and that is a decrease dependence on the MSP side of your business. You talked about cloud as -- I believe it was 37% in the quarter. If we were -- I know you’re not giving formal guidance for 2019 at this point but what -- as we’re standing here maybe a year for now, what do you believe that mix looks like between MSP and cloud and Super API?

[Hal Turner:]

Since Denis is driving the modeling with the team, I’m going to ask him to address that. But, the very good news is that the cloud portion is increasing fairly dramatically as will be the IoT or the Super API portion. Denis, do you want to comment, please?

[Denis McCarthy:]

Sure. As we’ve talked about in the past, Eric, we’ve increased our contracts by roughly 70, since the beginning of 2017. And o those 70 contracts, I would categorize 60% of those in the cloud space. So, all things being equal on implementation, because 30% of contracts that are in MSP space tend to be larger, I would say that it is going to grow into the 40% to 50% of revenue range on an ongoing basis. Our API platform is accounting for about 10% of our contracts right now. We expect that to grow in terms of the number of contracts; it’ll trail though in terms of revenue, but we expect to see that to start to ramp in a real way in 2019. Currently, this year, it’s less than 5% of our revenue. I would say that would more than triple in 2019 to be roughly 15% of revenue.

[Operator:]

We’ll take our next question from Mike Latimore with Northland Capital Markets.

[Mike Latimore:]

Denis, I just wanted to follow-on, I think just wanted to make sure I get the number right. Did you think that -- did you say the API business or app exchange business that could triple as a percent of revenue over next year or so, is that what you said I guess?

[Denis McCarthy:]

Correct. Yes, from just under 5% in 2018 to just under 15% in 2019.

[Mike Latimore:]

And most of those are IoT sort of applications, is that right or…?

[Denis McCarthy:]

Yes. I would characterize them broadly as IoT and smart city, which we’ve put in the IoT bucket. Those are the types of applications.

[Mike Latimore:]

And then, the gross margin increase in the quarter, is that something that’s sustainable, is that something that comes with more volume, or how should we think about that? I guess, more on an organic basis than I guess Artilium, what does that mean?

[Denis McCarthy:]

Yes. From a organic basis, I think that that number you’ll see vary from the very high-60s to the mid-70s, and that depends quite a bit on the amount of usage revenue that we bring in the quarter. And gain, I’m speaking purely organically. As we bring on the Artilium acquisition, they by nature had a -- through their IDM subsidiary had a far greater amount of usage as a company than we did. And so, that’ll drop our overall margins likely into low-60s. We are constantly working every day to bring those numbers up and again sustainably between 65% and 70% on a long-term basis is our goal.

[Mike Latimore:]

And then, on Artilium, is they’re turning to the purchase accounting effect on revenue there and if so how much would that be?

[Denis McCarthy:]

There is about -- we are losing roughly $1.2 million annually on purchase accounting basis from the loss of deferred revenue over the next 3.5 years roughly, so about $3.8 million overall. But, it is about a $1.2 million impact annually and I would say $300,000 to $400,000 quarterly.

[Mike Latimore:]

And then, just last I guess with regard to couple of recent announcements here. The new hire in the U.S., I assume the priority there is just new sales, but is the focus direct, is there on channels or is there some other initiatives there? And then, other one is, you said 11 customers I think went live. Is that going to sort of be the norm seeing 10 to 15 customers go live.

[Hal Turner:]

So, on the first part of the question regarding the sales executive, it’s very much direct still. We are in continuing to work on channels and expect to see some channel activity in 2019. And as it relates to the number of turn-ups or go-live, 11, we hope to make that bigger number and we the hope the velocity of that will increase. And that hope will be driven through our continued use of our own software and tools to make that work better. And we learn on every one of these implementations how to do it better next time, and you’re beginning to see the evidence of it. So, I expect to accelerate. Let me turn briefly to Ali, so see if he has a comment on that.

[Ali Davachi:]

Thanks, Hal. And I agree as well. We are making lead every quarter to improve implementation strategies and help our clients get up on the platform. So, I agree that we will certainly see acceleration in those metrics.

[Operator:]

Our next question comes from Barry Sine with Dawson James.

[Barry Sine:]

So, I wanted to ask about Artilium and the integration process. When I look at that company, it really struck me how similar the two companies are and how complementary the strengths are. My question is, you bring two separate sales forces, how are you doing in terms of training your sales force on their product portfolio and vice versa and then introducing your unique capabilities to their customer base and vice versa? And if I can make this a really complicated question, kind of a similar question with the iPass capabilities that you’ve added to the mix?

[Hal Turner:]

I am going to turn to Vic Bozzo to address the sales integration question with Rob Mumby and then we’ll come back to Denis on iPass because that is largely an IT integration at this point. Vic, if you would, please?

[Vic Bozzo:]

Sure, great, absolutely. So, one of the things that’s occurred as a result of the acquisition is, we have a broad new set of technology. And that additional technology is very much in line with where we were taking our marketing and our messaging. So, as a result of that, it’s really fit very nicely into the product set. And that really has helped the sales force to gel and merge together quite well. And I think, as Hal’s mentioned in the past, Artilium was very focused on the retail and enterprise end of the market and Pareteum’s been very focused on the service provider end of the market. So, the two teams have merged together very nicely. And we’re seeing accelerated growth as a result of that -- accelerated sales opportunities.

[Hal Turner:]

And Rob Mumby, would you like to comment on the iPass piece? Because I know you made a pretty material sale with your team on iPass capability after we licensed the IP.

[Rob Mumby:]

Yes. So, I think just for the overall sales force, there’s interest in other connectivity option. And so, iPass complements the connectivity that we provide, the mobile network connectivity that we provide. And it’s another option for couple of things. One, potentially cost reduction; and another for more robust connectivity along with information that you get regarding different connectivity options based on whatever your location is. So, there’s a lot of options that iPass has brought. And we’re seeing a lot of really positive traction with customers, end markets around the world.

[Hal Turner:]

Denis, anything you would like to add on the IP portion of that?

[Denis McCarthy:]

Yes, Hal. I think to steal words that you often use, it really gives us the last mile of connectivity for multiple avenues, whether that’d be wireless offloads for some of our existing mobility customers and/or deeper penetration for IoT applications. Alongside that from a technology perspective, they bring two really interesting pieces of technology to us. One is the ability to analyze data in real time on where users are spending their time in a particular area and what signals that they’re availing themselves of, whether those be radio access signals or Wi-Fi signals, gives you a sense of the utilization as well as sort of triangulating position where people are spending times and which is helpful in for shopping arenas and other applications as well. And then, lastly, coupling that all with the connectivity steerings being able to dynamically choose between those different access mechanisms to create the best overall seamless experience.

[Hal Turner:]

And Barry, I would just sum all of this up by saying we are in the process of cross-training everyone in the organization on the various products. And I don’t think we’ve even begun to scratch the surface on the upsell opportunities that are brought to us by the Artilium product line to the current Pareteum customer base. And we hope to expand that greatly.

[Operator:]

[Operator Instructions] We will take our next question with John Nobile with Taglich Brothers.

[John Nobile:]

I wanted to ask you a question about the stock compensation, the 5.6 million in the quarter obviously was high. Now, some of this was the related with the acquisition that was taking place, Artilium, is that correct?

[Hal Turner:]

Denis, over to you on that, please.

[Denis McCarthy:]

That is accurate. And as I mentioned in my comments, a large portion of that is non-recurring.

[John Nobile:]

Could you quantify how much of that is non-recurring, roughly?

[Denis McCarthy:]

I’m going to ask Ted for a little bit of help on that.

[Ted O'Donnell:]

We’re looking at about $3 million nonrecurring of that $5.6, and the remainder would be...

[John Nobile:]

Okay, non-recurring. But in Q4 -- in the fourth quarter, there will still be some of this trailing off into that quarter, maybe. I’m just trying to get an idea, I mean, I know this is not going to be going forward into 2019, but just to get an idea, how much it impacts….

[Ted O'Donnell:]

Yes. We actually do expect some in the fourth quarter as well, John.

[John Nobile:]

Okay. And thanks also for the quantitative cost saving synergies created with the Artilium. I believe it was mentioned about, $4.8 million on an annual basis. Is that correct?

[Denis McCarthy:]

Yes. We had originally projected $4.8 million and the result of some early savings, we actually are increasing our guidance to $6 million on an annual basis.

[John Nobile:]

Okay. But that’s going to be about 6 million…

[Hal Turner:]

And you’ve already captured 4.1.

[John Nobile:]

4.1, okay. So, if actually -- to get off -- and as an analyst I’m asking you to get off the quantitative end of it. But, if you could talk about it qualitatively, to think about how this is going to be benefit Pareteum organically, the synergies that this would create.

[Hal Turner:]

I will give you a couple of comments and then I’d like to turn collectively to Vic and Rob on that. So, this gives us an interactive voice response capability that we didn’t have. It gives us an API to be able to take into our carrier customers. It gives us a messaging capability that we did not have for text messaging and allows us to power and fuel marketplace, our shared economy type applications, again with our Super API. It also gives us the whole set of capabilities around the CRM and the way the information is presented to the customer on the portal and the orchestration capability for them to manage their networking capabilities. I will pause there before I get in trouble and turn over time to Vic and Rob.

[Vic Bozzo:]

Thanks, Hal. So, with this, we get a broad platform for communication including these APIs. So, that’s IoT, chat, SMS, voice, video, fax. And when you think about the use cases for that that brings us into banking and retail and healthcare and industrial. So, we really get a strong uplift technology wise that are that I would call customer facing, developer facing APIs which are really very, very powerful in the market today.

[John Nobile:]

That’s great to hear. And thanks for the detail and that I just wanted to understand that more, like I say qualitatively. Just one more question, quick question here, only because you mentioned, actually at September 30th backlog was what $403 million backlog, okay? Now, when you acquired Artilium, I am trying to get an idea of what type of backlog they had when you acquired it. Did that have about $70 million or is -- am I looking at this wrong? Because I think you had about $500 million backlog now with Artilium, I am trying to get an idea of what that was when you acquired it?

[Hal Turner:]

Denis is the keeper of the backlog. So, I’ll suggest him to give you the detailed number on it.

[Denis McCarthy:]

Yes. We’ve included about just shy of $50 million on an ongoing basis. You’ll note that roughly two years of their annualized revenue to-date, the rationale for that is there’s actually a fair amount of their revenue which would push that number closer to $80 million that is not subject to long term contracts right now, primarily coming out of again IDM portion of the business. So, there’s good strong recurring revenue there that is not under contract. So, we’ve excluded that from overall backlog but we will get the benefit of that as those customers continue to stay on the network.

[Operator:]

And we’ll take our final question from Ashok Kumar with ThinkEquity.

[Ashok Kumar:]

One, in terms of the operating forecast for the December quarter. Your topline guidance would imply $5 million to $6 million in revenue contribution from Artilium. I was wondering if you could clarify what percentage of that do you anticipate Telenet? [Ph] And also your customer dilution on a go forward basis, given that Vodafone [ph] was about three quarters of your revenues, so in terms of year-to-date performance?

[Hal Turner:]

Denis, do you want to address that, please?

[Denis McCarthy:]

Sure. So, for the Telenet portion of the Artilium, it’s actually fairly small on an ongoing basis, primarily based on a very large upfront license agreement with Telenet as you did look at their filings. And that was all stuck in deferred revenue, which we don’t get the benefit of from a GAAP basis. That said, we also do ongoing maintenance and other project work for them, which generates roughly about 200,000 to 300,000 a quarter from Telenet. So, we’ll get that. The majority of the rest of the revenue is all from much smaller customers. On the Vodafone concentration piece, we’re targeting them right around 55% of 2018 revenue. They’re coming in roughly $15 million give or take and roughly 55%. And of our overall backlog, they’re coming in right about 20% of our overall backlog. And I would note that represents a growth in the Vodafone business but a reduction of overall concentration.

[Ashok Kumar:]

And in terms of your key performance indicator, the KPI, you’ve grown your native connections from 2.2 million to 2.9 million over the last six months and you had earlier highlighted 1.5 million native connections for Artilium, given their different in market focus, service provider and retail and enterprise at Artilium. And would the 4 million plus, would that be the target connection opportunity for the combined company? And also, the ARPU which is in the low [indiscernible] where do you see that going for the forecast Artilium?

[Hal Turner:]

Denis?

[Denis McCarthy:]

I’m sorry. Could you repeat, Ashok, the first part of your question?

[Ashok Kumar:]

Yes, Denis. So, the KPIs, your native connection have expended from 2.2 million to 2.9 million over the last six months and you have also highlighted…

[Denis McCarthy:]

4.4, yes, correct.

[Ashok Kumar:]

And question is…

[Denis McCarthy:]

And I’m sorry. What was the first part of the question. I apologize.

[Ashok Kumar:]

The first part is, the 4 million plus target opportunity for native connection for the combined company given that -- I mean it seems this is additive given the different end market focus, right, service provider and retail and enterprise at Artilium.

[Denis McCarthy:]

The 4.4 is our current -- our target opportunity, I don’t think we’ve quantified just yet but we expect significant growth through 2019 in the overall connections.

[Ashok Kumar:]

And in terms of -- one of the gating factors for Artilium’s performance was they did not have a capital to expand the sales team. And are you beginning to see an acceleration in transforming the lead into contract revenue and backlog and sales under the combined company?

[Hal Turner:]

Vic, do you want to address that one, please?

[Vic Bozzo:]

Yes. Ashok, would you mind repeating the question, please. I’m sorry.

[Ashok Kumar:]

Yes. On Artilium, I think one of the gating factors for their performance was the capital to expand the sales team. Under the combined company, are you seeing an acceleration and turning their leads into contract revenue backlog and sales?

[Vic Bozzo:]

Okay. Yes. So, I would two things. One, as you know, we had an alliance with them prior to the acquisition and that Alliance is already bearing lots of fruit, which is great. They had a very robust lead generation program, which we’ve been able to bring into kind of our direct sales force model as well. So, we’re not really seeing intense capital requirements to get that acceleration, but we are absolutely seeing that acceleration.

[Ashok Kumar:]

And in terms of -- you talked about inorganic growth, the metric that historically I think your format has been not to buy companies in distress, focusing on companies that have fundamentally a good business model, generating fast revenues, and just the access -- providing them, the access to capital to be able to generate positive EBITDA and start contributing to the model [ph] in terms of cash flow overall, simultaneously realizing the cost synergies. I assume that still is the criterion for the target…

[Hal Turner:]

It is. And we’ve only done one company and that’s Artilium, and that’s exactly what has occurred here. So, yes were able to convert almost all this as base revenue with the exception of the upfront license fee matter that Denis mentioned earlier. And we see significant growth in that without the corresponding scaling cost that might normally be required if you are going after the revenue organically.

[Ashok Kumar:]

And one last question is on the cost synergies, you’ve taken that up from 4.8 million to 6 million. So, the original breakdown was 4 million plus in SG&A and 0.5 million in COGS. Do the same ratios hold for the higher amount or are you seeing something different?

[Hal Turner:]

Denis, do you want to talk about that?

[Denis McCarthy:]

So, to increasing to 6 million -- yes, I think I have it. So, if you’re saying the increase from the 4.8 million to the 6 million, are we seeing the same ratios, I think that on our overall 6 million basis, we would expect roughly 5 million from G&A synergies including headcount, and about a 1 million from cost of goods sold. So, slightly different ratios than before, a little more on the cost side.

[Operator:]

And that concludes today’s question-and-answer session. At this time, I will turn the conference back to Hal Turner for any additional or closing remarks.

[Hal Turner:]

Thank you very much. As we close this out today, I just want to reaffirm that we’re growth company. We view that the fundamental measure of success for Pareteum is shareholder value. We create this over the long term. So, I’ve got a few closing observations for you. I am often asked by our Board what keeps us up at night as a management team. And for us, all of us, it’s waking up each day and really understanding that we have great, loyal customers until they aren’t. And this means to us that it’s got to be always about the software, the services, the APIs, the deployment, the quality of services, and the customer value that is derived by us providing those services. So, that means that we know the taking care of customers and their engagement journey with us is our very best competitor response and will keep us growing. Another observation is that we continue to cede our future. We did it and have done it with Artilium, and we will continue to develop new software APIs, applications and solutions as we apply our strategic alliance approach. We understand that missionaries build better products, and this is partially what we mean by we’re all in sales. Our vision and mission have remained unaltered. It’s open mobility and applications for connected devices on any network anywhere, and we see that as a facilitator to access mobility and software services for the underserved throughout the world. We know that we must continually build and grow, offer superior products and services or lose our relevance. The big news for us is that we’ve grown our revenue from $3.5 million on a quarterly basis to $8 million on an organic basis in one year. That’s the trailing four quarters. And that’s not to mention the $3.5 million of adjusted EBITDA on a year-to-date basis. That’s a very, very strong rule of 40 performance. It calculates out to about 286%, which, by the very definition of rule of 40, once you get above 40, you should be getting higher multiples. We also see that as we think about that this is even if we didn’t sell another contract, today we’ve got 379 million of revenue value over the next 36 months. Sitting there in contracts, awaiting implementation and deployment, and that’s based upon the customers’ contractually executed schedules. That means that we’ve got $121 million of revenue over 36 months that’s in production and creating recurring revenue that includes ARTA. And it also includes -- that does not include the not contracted revenue from within Artilium. So, this is a vivid reminder that cost customers love very much what we are doing for them. With the Artilium acquisition, the management team and I believe that we have substantially completed the turnaround of Pareteum. Pareteum doubled its sales by the end of this year 2018 over 2017. And now with Artilium on a pro forma view, we’re going to double them again with the Artilium acquisition. Our market cap is dramatically increased from 50 million in November of 2017 to I think Denis just quoted to 227 million. We are now included in the Russell index and we’re poised we believe to move higher in 2019. It’s a real testament to Pareteum shareholders and our management team that we’ve grown from $0.90 a share on November the 7th, 2017 to $2.29, which is 154% growth through one year. We’re very pleased with that, but we’re not satisfied with that. And we don’t think it reflects the fundamental performance of our Company and the results that we’ve been producing. Denis noted for you that our long aspirational view is $25. We have a plan in place to produce the results to support that target. That would be a 1,200% upside. That’s what our team is focused on. It is a long goal. We seek your support in helping us achieve these long target views. And with that I say thank you, and our third quarter earnings call is concluded. Thank you, teammates. Thank you, stakeholders. Bye.

[Operator:]

This does conclude today’s conference. We thank you for your participation. You may now disconnect.