Pareteum Corporation
Q1 2017 Earnings Call Transcript

Published: 16 May 2017

[Operator:]

Good day and welcome to the Pareteum 2017 First Quarter Financial Results Conference Call. Today’s conference is being recorded. [Operator Instructions] at this time I would like to turn the conference over to Mr. Steve Gersten, Director of Investor Relations. Please go ahead, sir.

[Steve Gersten:]

Thank you, Val [ph], and good afternoon or good evening to everyone. Thank you for joining us today for Pareteum Corporation’s first quarter ended March 31, 2017 analyst conference call. With us today are Hal Turner, Executive Chairman; Vic Bozzo, Chief Executive Officer; and Ted O’Donnell, Chief Financial Officer. Earlier today after the close of the markets Pareteum released financial results and filed its Form 10-K for the quarter ended March 31, 2017. If you’ve not received Pareteum’s earnings release please visit Pareteum’s investor page at www.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 statement 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 agreement, any statements regarding expectations for the success of the company’s products in the US and international markets, any statements regarding future economic conditions or performance, statements of behalf 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 yesterday’s press release titled "Forward-Looking Statements" and in the public periodic reports that the company files in 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, Executive Chairman of Pareteum.

[Hal Turner:]

Steve, thank you very much, not only for driving today’s call but for all the hard work that you Michael and do on behalf of Pareteum and our stakeholders, we appreciate you very much, so thank you. So good afternoon to everyone in the US and good evening for those who’re joining us from Europe or Asia. I want to thank you for joining our call today for our Q1 quarterly analyst and business update. It’s really only been a few weeks since our Townhall Conference call and in my subsequent shareholder letter update, but during that time we have made extremely notable progress and there are number of updates that we have for you today. So with me on the call today are Vic Bozzo, our CEO and Ted O’Donnell, our CFO. And following our remarks, both Vic and Ted will join me in our Q&A session. And it’s during that time that you’ll hear them comment on relevant points regarding our progress as we address your questions and provide our answers. You have all hopefully had an opportunity to see the earnings release and the filed 10-Q. so I’m not going to read that to you, other than just noting a few, what we think are important highlights. We will offer additional comments during that Q&A session and we will invite your questions at that time. So let’s get started. As we entered in the first quarter of 2017 following the, what I consider to be very significant progress in our restructuring turnaround the refinements and improvements to Pareteum are very much ongoing. We expect to always be in a move that we refer to as make it better mindset. I’m not surely, what our derives from the Pareto principle where we always focus on the small number of things, that yield the greatest results. Much of the foundational work requires the focus on sales and growth within the business have been achieved. In the quarter the business performed as expected, this performance is the result of our efforts to solidify and streamline our financial foundation and continued a very highly disciplined financial stewardship at the company. During the first quarter we focus significant efforts on software development and this was part of our software as a service or SaaS platform for global mobility and managed service platforms. The new capabilities that were developed and are now being commercially offer were for services like 4G broadband and have been thought by our long-time customer Vodafone and now because of that development become available on a global basis. This is a meaningful opportunity for us. We’ve also added advanced messaging to our capabilities by developing extremely powerful API capabilities that’s Application Programming Interfaces these support the vast opportunities that we call the Internet of Things. This simply means that the application and solution integrators in the world as well as developers, can now use our software to build end-to-end turnkey solutions. You may know that, this is how Uber and WhatsApp that’s just to name a few of the better known examples developed their business. We intend to use our resources to identify and find that next future wave, whether it’s a smart connected car or a smart home and the list really goes on, and on, and on. It’s a great, great opportunity to have in front of us as we execute on our mission of being value creators. And we take this very seriously versus being the evisceration of value, what we have seen in our company in the past. It is this growing market of all things connected where billions of devices will require capabilities to communicate, to meter that data usage, to charge the data usage, to build for that data usage and to report on what’s been monitored. We call this service suite, our applications exchange and development platform. It is for the very broadly defined IoT market and some of those vertical segments that I just mentioned, who will use this service. Make no mistake this is a very vibrant new growth area for the company and then one that we’re very, very excited about. Vic’s going to speak about this and some of the sales progress that we’re making with a number of our customer deployments and that will come up in a few minutes. As noted in their earnings release, the first quarter reflects results of our efforts to clean up our balance sheet. This includes $1.5 million payment that was made to our senior secured lender Atalaya. A new agreement was reached with Atalaya to make a very positive series of amendments to the existing debt arrangements. We’ve also executed a number of transactions designed to simplify our capital structure and reduce or eliminate a number of the very complicated variable instruments that have been on our balance sheet for quite some time. We’re building a business that we expect to better reflect its inherent and potential value and to deliver sustained results. Sustainability and dramatic growth requires more than just the leading edge technology that we’re very fortunate to have. It requires talent leaders, it requires strong leadership and strong relationships. In the first quarter and into early April, we were able to significantly bolster our executive and sales teams. I’m very gratified that each of these individuals see our vision, they see it as we build it and they’re helping build it. These individuals recognize the potential ahead of us and they’ve chosen to join our company freely and willingly on this journey. I’d like to now turn to some of our financial highlights and briefly touch upon a couple of things. We reported in Q1, 2017 revenue of approximately $2.8 million that was compared to $3.3 million last year same quarter. This decrease resulted from our sale of ValidSoft and our customers retail subscribers, a seasonal churn. Our gross margins which are expressed as a percent of revenue increased from 66% to 70% and this is due to the direct reduction of cost during 2016. Our operating expenses were $4.8 million for the quarter decreasing 37% from the $7.5 million same quarter last year as a result of the company-wide restructuring program implemented throughout 2016. Our loss from operations improved by 53% to a negative $1.9 million for the quarter compared to a negative $4.3 million loss in 2016. Our net loss per weighted common share, average share was $0.14 and this was a fairly dramatic improvement by 79% from the $0.66 per share in 2016. Our adjusted EBITDA in the quarter was a negative $198,000 and reflecting a 91% improvement from the negative EBITDA of the negative $2.1 million reported last year. Collectively the Atalaya amendments that I referred to earlier provide our company with significant flexibility to not only run and operate our business but starting in the second quarter significantly enhancing our cash flow by reducing our debt surfacing needs throughout 2017 and 2018. It’s our goal to continue to make demonstrable and operational progress and to maximize the value of this additional cash flow to further support the growth of the business. I want to especially thank Ted, Dan Rios, who’s our Controller, Alex Korff, who’s our General Counsel and our whole financial and corporate team for their continued hard work toward the success of our business, which on their watch is underpinned by diligent financial and legal stewardship. It is greatly appreciated by all of us gentlemen. Ted will have some comments during our Q&A as he address some of your questions. Now I have some very exciting news to announce and it is my great pleasure to speak about something that I think is a major milestone for us. Particularly when you look back over the last four years. We’re acutely aware that you can’t cost reduce and expense save your way to growth and prosperity. Although I do think our team has done an extraordinary job in preserving the business through our actions to restructure and conserve cash, but we all know we must sell things. We must grow our top line revenue and that is why, we’re especially excited by our first major new sales success. The following headline will appear in a press release that will be issued before market opens tomorrow and I will read this to you. Pareteum enters Brazilian mobile services market with seven-year Virtual Network Enabler Agreement. New services platform deployment to support the launch of multiple wireless brands and services. Ladies and gentlemen, we’ve entered into an agreement with a very well established Brazilian financial services and marketing company to provide mobile networking connectivity and subscriber management services which will support their plans to provide mobile connectivity and IoT applications to retail and enterprise customers. This is a major mobile virtual network enablement sale, it is a major managed services platform sale. In fact, as we Vic and I looked at this week. I think it’s the first one since 2013. This comes with significant long-term growth potential and this is forecasted by our new customer. Tomorrow’s press release is going to highlight the paid upfront service establishment fees and guaranteed recurring monthly service revenues that has a minimum total contract value up to $1 million approximately. This upfront money is very important to us because it offsets the expenses related to installing and implementing our managed services in VNE platform, which again is the mobile Virtual Network Enablement. The more important element is this customer’s projection which we have examined and validated in our minds for future business and what this platform could unleash for Pareteum in the future. Beyond our guaranteed minimum total contract value, TCV; our customer expects that over a three-year period that we will be managing and collecting monthly recurring revenue for as many as $3 million subscribers and supported connected devices. These customer forecasted subscriber volumes have revenue generating potential that gets to the eight figure dollar range that’s very significant to us. This clearly has the potential to move our top line performance dramatically. Also we’ve been active in Brazil as many of you may know for quite a while, we’ve been working with an array of partners and potential customers. We view this newly executed agreement and the implementation of our managed services platform in Brazil as the milestone event that will let us leverage these past relationships. We expect this newly opened opportunity to facilitate those relationships that have been established and potentially create incremental new growth in future revenues. This is why, we’re so very encouraged and why we have reasons to be optimistic not only about Brazil but what this will mean throughout the rest of the world, as we compete in the eyes of other major global carriers. We will scale over the course of this agreement many of these relationships. I specifically want to acknowledge the perseverance of Vic, Rob Mumby, [indiscernible] and our whole Spain based team that supported this transaction. They know that we’re all in sales and these guys are sales warriors, that includes Nick and Chris, you know who you are. And we’ve proven once again that it only takes a small number of real professionals to get the job done expertly. So Vic, thank you and thanks to the team. It doesn’t take 300 plus persons to do the job. So this time I would like to now yield to Vic Bozzo for his brief comments on our recent business developments and then Vic and, Ted and I will take your questions. Vic, over to you.

[Vic Bozzo:]

Thank you, Hal. Quite an exciting time inside Pareteum. As we continue to focus on our three sales initiatives which I’ll speak about. Our development and deployment teams have been hard at work. As you recall, we took on two new projects with Vodafone. In my experience after analyzing these requirements, we delivered what amounted to be a one-year project by all standards in less than four months and I’m happy to say, our Vodafone roaming project began loading new sims this month and our broadband project, which you may have read about with Vodafone’s recent press release and announcement will go live this month. While we await the ramp of subscribers delivering this project on time and faster than industry norms is a great testament to our focus and a barometer of good things to come. We’re making good progress on a global cloud mobility initiatives and moving to deploy live Pronto, Sol and our latest Internet of Things customer themes. On these sales initiatives, I think the most important comment is the caliber of the people who have joined the company from industry leaders such as Telio, Verizon, British Telecom and others. The global connectivity cloud brings us into new markets as Hal described. We have a robust pipeline and I hope to be able to share even more news like Brazil in the not too distant future. Thanks Hal.

[Hal Turner:]

Vic, thank you so much and ladies and gentlemen, with that we would like to open up for any questions or comments that you might have. Steve?

[Steve Gersten:]

Operator, can you queue through please?

[Operator:]

[Operator Instructions] And we will take our first question from Lisa Thompson of Zack Investment Research.

[Lisa Thompson:]

So let’s talk about Brazil, in the morning when the press release comes out. Will we know some of the customers?

[Hal Turner:]

Lisa, we will not be announcing the customer’s name and I’ll tell you, why? It’s our experience that when we name the customer it makes them a target for competition and even though we have named in the past Vodafone, I wish I could have taken that name away in some degree. So we will not be naming the customer because of the competitive sensitivity, but I can tell you it’s a well-established financial services organization who has a number of subscribers and they’re leveraging their capabilities now to go fully into the mobile space.

[Lisa Thompson:]

So when you said they have subscribers, what subscribers for what?

[Hal Turner:]

Financial services covers a broad array of things, so I don’t want to comment too much further than that, but it goes everywhere from validation of transactions, for payment systems, to authorization, also to security of financial and mobile payments. They’re ideal for us, quite frankly.

[Lisa Thompson:]

So does that mean they have customers reporting over to you or is this MV [ph] start up service that they’re going to offer that they never did as well.

[Hal Turner:]

It’s a new service for them but it does come with their existing relationship of pretty dramatically important city automation which is in the IoT space. It also comes with their relationship that has to do with churches and ecumenical offerings throughout Brazil, so we have expectation that the subscribers are going to follow rather quickly. I would like to have Vic place a comment on that, simply because he’s been spending more time on this than I recently although I did spend some time in Brazil. Vic, would you like to further adders Lisa’s question on this?

[Vic Bozzo:]

Sure. So the market is pretty explosive down there, but the key is that very few people have connectivity to the actual operator who can provide the wireless service and we’re working with someone who’s connected the number one wireless company there. So it’s a very strong group for us and it also enables us to bring all of our previous discussions into a beachhead platform for us. So we’ll have full accessibility throughout Brazil to bring any of our existing relationship as well.

[Lisa Thompson:]

I remember those traditionally from a few years ago, I thought it was some there you’re going to have like the Dioceses is going to use it for all their employees, all the churches, is that the same thing because you said financial services. It sounds like, it’s a don’t.

[Hal Turner:]

So, goes ahead. Vic.

[Vic Bozzo:]

Okay, I was going to say that we’re seeing in the industry a blowing of the lines between what’s a subscriber. So it could be everything from a point of sale machine that’s sitting inside of taxi cab all the way to a smartphone user who’s looking for a lower cost of service or looking to add broadband service. So we’re seeing a wide range of opportunity there, but we expect already have identified three to four MVNOs, let’s call brand specific MVNO’s that are already ready to begin porting into the platform, the key is getting the platform deployed.

[Lisa Thompson:]

Okay, great. And could you give us an update like Vodafone is able [ph] in the roaming business. How are they doing?

[Vic Bozzo:]

Sure. Actually business is quite strong, what I referred to earlier in my comments was that. This week Vodafone announced that Lowi, as you know we powered Lowi, that Lowi had added broadband services to the platform and that opens up the entire kind of what we would refer to here in the US is kind of the convergence of cable and mobile, so it’s quite an exciting advancement and so we’re seeing opportunity there as well as multiple new MVNOs that have come up.

[Hal Turner:]

And Vic I think, it’s fair to say for Lisa that last week you and I spent the whole week in Spain and with Vodafone and the strategic meetings we had and was showing us their plans relative to not only the MVNOs that they support off the platform that we power, but the marketing programs for their brand. Certainly spell just basic increase in business that it’s expected this year and certainly into next year from Vodafone as well as the Vodafone roaming services application, which go outside of Spain.

[Lisa Thompson:]

Thank you. And maybe there has been [indiscernible] to be a 10-Q out yet, and you said in the review that balance sheet on the press release. Can you talk a little bit about your current state of financing and if you see any more need for raising cash? And then also vaguely what’s the full diluted share count out there now?

[Hal Turner:]

Okay, I’ll address topically the raised money cash questions and then I’ll yield to Ted for the more specific answers. We certainly have in our disclosure of both the 10-K and 10-Q that we expect to raise more money in 2017. Our plan is certainly coming together, so that we believe that the value of our company will be better recognized, so we have no immediate plans for raising capital but we will at some point during this year, be in the market based upon reflection of our higher value and based upon these sales. I would also say that the austerity programs that we put in place as well as the accommodations that have been reached with Atalaya give us much more runway with our cash and therefore give us some comfort in this, as it relates to the specific share count it’s just under $13 million. I think it’s like $12,900,000 and Ted you want to expand on this and clarify any of the points that I might have inadvertently misstated.

[Ted O’Donnell:]

Lisa also going to --- asked, whether [technical difficulty] $20 million and little bit below and that [technical difficulty] point out in relation to the cash and cash equivalent that you all have out there you go ahead and clear some of the cash [technical difficulty] balance.

[Lisa Thompson:]

Right, got it.

[Ted O’Donnell:]

As $3 million [ph].

[Lisa Thompson:]

So you’re saying it’s $20 million shares fully diluted that’s like the all in number.

[Ted O’Donnell:]

That’s the whole.

[Lisa Thompson:]

Okay and $12.9 million is the treasury stock or something?

[Hal Turner:]

Issued and outstanding.

[Lisa Thompson:]

Issued. Okay. Pronto shares though. All right. I guess that’s it. Is there anything you ought to know?

[Hal Turner:]

Stay tuned, Lisa. That sales pipeline is looking pretty robust according to Vic and team. And I’m pretty excited about it, so we look forward to your future comments and questions. Thank you. Steve?

[Operator:]

Absolutely. Our next question will come from George [indiscernible], a Private Investor.

[Unidentified Analyst:]

Hal and team, so obviously congratulations on this deal in Brazil. Obviously this is the first deal that saw the significant as it were. I have a couple of questions about the deal, which you would expect I would imagine. You did state, you’re getting some cash upfront as is the norm, did I hear that correct? If so, how much is that please?

[Hal Turner:]

We’re getting cash up front and that amount is $300,000 and that comes to us in an initial partial payment and then as the system is churned up which is expected to be over four to six month, balance of the cash comes and then the contract calls or minimum billing which escalates over a six-month period and that’s where the $2 million minimum contract value expectation comes from.

[Unidentified Analyst:]

Thanks, great deal congratulations again.

[Hal Turner:]

Thank you.

[Unidentified Analyst:]

This deal seems to be very exciting not because of the size although that is exciting, clearly. But it sounds like it’s the first deal whereby it’s a genuine hybrid of some of our more traditional offerings and also the burgeoning and exciting world of IoT. Am I thinking about that, are they still in [indiscernible] here? Am I framing that correctly?

[Hal Turner:]

You’re George and if you would like for us to get Vic to expand on that a bit, we can but you’re absolutely thinking about it in the right way.

[Unidentified Analyst:]

Okay, all right so, to me one of the reasons I’m an investor is because of the differentiation that the company offers encompassing more traditional areas plus the new burgeoning of IoT. So it sounds like this deal is a personification, is an example of that. My assessment is, this is fairly accurate would you say on that?

[Hal Turner:]

It is accurate and you’ve touched upon a key element there, which is the competitive differentiation and our ability to take that core basic software forward. So the biggest differentiation is, that we own and control the software and therefore we can open it up and create these application programming interfaces for developers and for solution integrators and that’s what leads it into the IoT spaces, smart cars, connected car, smart city, smart meter, smart and it goes on, and on, and on. And so you’re absolutely thinking about it the right way and it is because we have virtualized this for cloud delivery that we can also offer the big platform like we’re doing in Brazil but we can offer smaller versions of that and access on cloud basis at a greatly reduced price which will expand our market.

[Unidentified Analyst:]

Okay, very good. Just a couple more questions and I’ll jump back in the queue. Clearly the differentiating factor that the fact that the company owns its own IP for this is clearly very attractive. So how should we be thinking about the existing and new pipeline of qualified opportunities. This deal in Brazil I’m sure it wasn’t overnight, I know you and Vic have worked your magic with Mr. Mumby I’m sure, I can smell some of the Twilio activity there as it were, how these new deals in the pipeline. I’m guessing they take four to six even up to nine months. How would you characterize the existing opportunities that are in the pipeline in terms of, how long you’ve been at it. I’m not looking for a forecast here and you do that internally I’m sure, but I’m just trying to understand what the mix of those deals are, are they similar - this Brazil deal whereby it’s a mix of IoT and traditional or some standalone IoT, it is very exciting for me. I’m just trying to get my arms around it, I’m trying to understand the pipeline, does that make sense?

[Hal Turner:]

It does George. So the first response is that, there are several large deals in the pipeline that are of the same magnitude or similar magnitude for Brazilian deal. These larger deals are also of magnitude that could equate, if not surpass over a few year period what we’re currently doing with Vodafone. So those are large managed services platform, you’re correct that most of deals would take anywhere from six to 12-month sales period. The very good news is that, the people we’ve recruited and including Vic and his team came with some level of relationship rolodex and known opportunities has allowed us to leapfrog forward, what could have been expected to be six to 12-month period. So therefore for the balance of the year, we see at least another one large deal over the course of next couple months and I would say the balance of Q2 and certainly into early Q3. Lot of dependencies on that, but that’s what we’re aiming toward and we have visibility that could produce that result. For the balance of the year beyond that, we certainly see the opportunity for at least another one or possibly two large deals. Now beyond that, we’ve got a number of what we call the global mobility cloud deals, which cover the smaller operators you’ll remember names that we’ve announced such as Sol Mobile and Pronto which are now beginning to come online, they’re a lot more of those types out there, as well as a generous mix of IoT opportunities as characterized by the taxi cab application themes. So it is a combination, however the predominance of revenue will come from the managed service of the large platform for the balance of this year and in 2018, we’ll begin to see the global cloud revenue show up in a percentile basis and certainly then followed by IoT. Vic, anything you want to add to that, that I might have missed?

[Vic Bozzo:]

No I think it’s pretty comprehensive. We do see that in each of these large MVNO deals like Brazil, we do see as you point out George a combination of IoT and traditional Lowi type business on them and I think it’s safe to say that almost every MVNE type managed service provider is going to go after all - comes all types of those businesses and what makes us very unique is that we enable them to do that from the same software platform. So what we’re hearing is that, they may have an MVNE platform today, but to add IoT they got to go buy a different one. And in our case, the same one works for both.

[Unidentified Analyst:]

Beautiful. Okay guys, I’ll jump back into the queue. I just want to say congratulations on the turnaround and it sounds like you guys are now having fun. Which makes me feel good as a shareholders, so thank you for that? Thank you operator.

[Operator:]

And our next question will come from Brian Cowell [ph] of RF [indiscernible].

[Unidentified Analyst:]

So I wanted to I guess get an idea, how this deal relates to your prior effort in the region and if that’s enhanced them at all and if you guys see sort of more fruition coming from those as well, to this deal.

[Hal Turner:]

The answer bottom line is yes in all the ways I’m going to ask Vic to expand upon that, but clearly our former discussions with churches our former discussions with various integrator partners and companies such as Cleartech and others will now be enhanced because of this. Vic, do you want to put some color to that please?

[Vic Bozzo:]

Yes, so what I would say is interesting, it’s probably the same across the world. There is always a neck of the funnel pardon the pun. There is always a place where everybody comes together even if they’re a marketing company or they’re network company and that is, you need wireless access. In the US, we know there is very few people who can actually provide you with wireless access, the same goes for Brazil. So in order for us to get many of those companies to have a place, to bring their subscribers, we first needed to work and sell our technology to a group that had access to the wireless network and that’s what this deal is really about, it enables us to bring all of those other subscribers to the network.

[Unidentified Analyst:]

So it would be fair to call this sort of like hub and spoke model and is that fair to say, you’re going to report this in other countries in that particular vein?

[Hal Turner:]

Yes. Bottom line and deporting comes through the cloud which takes the price of access down dramatically.

[Vic Bozzo:]

And what I think also adds to the exciting nature of this is, now that taxi cab that wanted - that has taxis not only in the US and Singapore but also in Brazil has a place to actually aggregate that same wireless connectivity and a platform to do it from, so in a way we’re helping our customers as well to find more customers.

[Unidentified Analyst:]

And to your point out there, you kind of just flipped in there that, it creates sort of lower cost of access. Do you view; I guess each person who access that sort of cloud or each data point to the cloud? Is that incremental margin to you, I guess [indiscernible].

[Hal Turner:]

Yes, absolutely. In fact, those will be the most profitable in terms of margins. You’ll note from our financials that our margins increased from 66% to 70% as we’ve add more of these cloud deals, those margins will actually go into the high 70s and could even go on the software portion up to into the 80s. so it’s a real margin driver and it’s all incremental, the basic is already been deployed. By the way - go ahead.

[Vic Bozzo:]

This is effectively, once you get the hub from that point on everything that you add which obviously makes the process a lot easier, to all those folks that you start adding and all the sort of surrounding constellations [ph] around it, are going to be significantly more profitable for the company. so really you’re sort of sunk cost trying to find that hub where it’s going to be breakeven/money/lower margin. But getting that anchor lead to significantly 90% margin on everything else.

[Hal Turner:]

Absolutely, spot on. I was just going to make a comment. One of the most amazing things in my mind is that THYNGS, T-H-Y-N-G-S customer, the Las Vegas, taxi cab that’s being served out of the Netherlands, our cloud pop out of Netherlands, so that’s a vivid example of the power of the cloud and what Vic is referring to as, a point where we can aggregate the wireless traffic.

[Unidentified Analyst:]

That’s added an amazing point actually. I appreciate it guys and then congratulations again. Looking forward to following your continued success.

[Operator:]

And our next question will come from Dennis Dolin [ph], Private Investor.

[Unidentified Analyst:]

And congratulations on everything, you’ve done so far, have been a long-term investor and I’m finally glad to see some positive things and management onboard. My question really relates to the restructuring and the restructuring cost. It looks like, the cost have come down, can you just give us an update as to where you stand in that process?

[Hal Turner:]

Yes, absolutely. I’m going to ask Ted to primarily comment on this. But I would just simply say that the vast majority of the changes we have taken have already been done and the cost absorbed. So the things we do at this point forward refinements, so we don’t expect a significant amount of going forward restructuring cost. Ted, you want to add some color to that and maybe a little more flavour for Dennis.

[Ted O’Donnell:]

Yes, the largest pieces completing Q3, if you go back and look at those financial statements you’ll go ahead and see the - all the [technical difficulty] part of that’s goodwill and intangibles, all those things were written off and impairment [technical difficulty] in the fourth quarter [technical difficulty] see these things as they have [technical difficulty] grew through the third quarter [technical difficulty] add back. The first [technical difficulty] you can see as far as how that’s going to end on [technical difficulty] for maximum share of value [technical difficulty].

[Unidentified Analyst:]

Great, thanks very much.

[Hal Turner:]

Thank you Dennis. By the way, one analyst published last year referred to everything but the kitchen sink went into restructuring cost in write down, so I think we’ve got most of it taken care of.

[Operator:]

[Operator Instructions] our next question will come from Greg Randall, a private investor.

[Greg Randall:]

I just had two clarifying questions. The baseline revenue for that particular deal $2 million, would that be over of seven years?

[Hal Turner:]

That is a minimum over seven years and that’s the combination of the upfront fees and the monthly minimums. So let me just give you a point of fact, those monthly minimums are very synonymous to the same monthly minimums that we experienced with Vodafone when we started and with Zain, when we started and in every case, there is a threshold that will be reached in reasonably near time with the subscribers and the monthly billing for, to support of those subscribers will began to far outweigh the monthly minimums, that’s why we’re so bullish on the upside of the contract versus focusing just on the $2 million total contract minimum value.

[Greg Randall:]

Thank you. The 10-Q is not out and I’m just wondering, was there any deferred revenue component in your Q1. And if there was, was it any different from basically Q4?

[Ted O’Donnell:]

There was some deferred revenue. In Q4, we had net revenues in excess of billing which is a little bit different from deferred revenue. Deferred revenue is, we go ahead and see cash ahead of [technical difficulty]. So as far as difference there [technical difficulty] and receive some [indiscernible] folks from Vodafone and [technical difficulty].

[Greg Randall:]

That was Q1, correct?

[Ted O’Donnell:]

[Technical difficulty].

[Greg Randall:]

Very good. Thank you, gentlemen. Appreciated.

[Operator:]

And our next question will come from Howard Weinberg, Private Investor.

[Howard Weinberg:]

Congratulations particularly to Vic, I guess on this new deal in Brazil. My question is, I don’t believe it was answered in the other narratives, but why is it important for you to global business, global cloud business and not just sell to them mobile virtual network enablers customers if you will.

[Hal Turner:]

Vic, you want to handle that one, please?

[Vic Bozzo:]

Sure, I’ll take it. Thank you. So there’s many types of wireless applications as we know Hal has mentioned in connected cars, Wi-Fi hotspots, ATMs, taxis, interactive billboard. All of these devices have a wireless sim just like your phones. Those wireless sims must have connectivity but they also need someone to meter it, bill it, monitor it and charge on behalf of the carrier. That’s really what we do, as I said before it’s same software that we use for both. But by adding the cloud version of our platform, it enables us to prospect as Hal said anywhere in the world and whereas in the past, we had to affectively find and build operate and transfer a full package every time we identify the customer, in this case we can literally turn them on from wherever they are in the world. There’s more of those that type of applications than there are of the Brazil MVNE applications but generally they’re faster time to make and when you cascade them together you get massive amounts of subscribers as well. So every time we bring up one of these MVNE situations like Brazil, we also open of opportunity to anybody in the world who might have an application that needs to run in Brazil.

[Hal Turner:]

Vic, Howard. Can I just one brief analogy. It’s like the MVNE platform in Brazil, that’s like going to Savile Row, it’s whole cloth, it’s cut made to order many custom. The global cloud is alterations off the rack and it’s a lot less expensive and allows us to get to a lot more people, that’s the primary difference.

[Howard Weinberg:]

Got it. So the second part renewed, so how do we see the percentage of business between the two in the future? [Indiscernible] and the MVNE.

[Hal Turner:]

Almost 100% of our revenue this year slightly less will come from the mobile virtual network enablement platform that’s the Vodafone’s and the Brazil’s and those applications. As we move into the fourth quarter this year, you’ll begin to see the Pronto’s and the Sol Mobile’s began to come on board. It will not be materially meaningful to the total revenue this year, but as a percent next year we’re hoping to get that into the 10% to 15% range. We would like to see the IoT revenue certainly in the 5% to 7% range. Our overall goal over the coming three years would be to take the global mobility cloud up to at least 50% to 60% of the total revenue and that will also have the effect of taking the revenue concentration, that dependency that we’ve got on Vodafone and Zain at this point. So the best of all worlds in news is, that Vodafone is buying more from us. The challenge for that is, we’ve got to outsell the Vodafone revenue growth with IoT and global mobility to make sure that investors understand that we’re managing the risk in the business.

[Howard Weinberg:]

Got it, thank you.

[Operator:]

And our next question will come from Tom Cruise [ph] of Dawson Jane [ph].

[Unidentified Analyst:]

Congratulations on the Brazil deal, that sounds very exciting. My question is actually about the THYNGS deals here in the US and could you give us more on that deal and what your expectations are?

[Hal Turner:]

Absolutely and I’m going to let Vic go through it, but I think you’re going to be very impress to understand that we’re powering those screens in the back of taxi cab and with our technology we’re going to be able to put Wi-Fi in there too, so. Vic, you want to talk about it.

[Vic Bozzo:]

So you can imagine, when you get in the car. Number one I would say that, when you think about Las Vegas for example that’s one area that this opportunity is global in nature and its global in nature because it’s a similar concept, it’s a similar company and the company and the company is already, actually providing these services in other places. The main key and the main challenge for anybody who’s doing this kind of global business, is that the need to negotiate individual beholds [ph] every time they go to a different country. Right, so they may offer the same platform, the same screen, the same point of sale machine which is, when you put your card in that machine and that charges you, you need metering and billing and you also need wireless access, so you can imagine if they do that in more than one place, they need a network that can do that for them and that’s really the importance of building the network connectivity of having someone in Brazil as an example that allows us to allow that company to go into the market. So in general we’re providing a platform and we’re also providing the wireless connectivity similar to the way we do for SpeakUp, in Netherlands as an example. And the advantage of the call, is that we can run it from anywhere. And so we were able to leverage our CapEx that we spent to build that platform out in the Netherlands already.

[Unidentified Analyst:]

So you could see this not only in the US, this could go worldwide with the taxi cab industry though.

[Vic Bozzo:]

Absolutely, it’s already in progress.

[Unidentified Analyst:]

Well that sounds like, it’s bigger than Uber though.

[Hal Turner:]

Well it could be.

[Vic Bozzo:]

Well the opportunity yes.

[Unidentified Analyst:]

If you think about it.

[Vic Bozzo:]

Yes the opportunity, the levers that across other industries is really what makes us exciting and part of these are, I view these as they’re case examples of what’s going on potentially in mass transit, what’s going on in the smart city, what’s going on with the bank who has to monitor all their ATMs as an example, anything you can think of that has wireless device, is going to need someone like us to make that metering and charging happen and bridge that for some of the service providers as well.

[Unidentified Analyst:]

Great, thanks very much.

[Hal Turner:]

Tom, thank you. Steve, I think we’ve got time for one more question before we have our wrap up comments.

[Operator:]

And our final question will come from John Philip, a Private Investor.

[John Philip:]

Can you hear me?

[Hal Turner:]

Yes, John. It’s Hal. How are you?

[John Philip:]

I’m good Hal, thank you. I want to thank you guys, you have a great vision for this business. Obviously for setting that vision that’s our first, that what gives us shoot for. My question is more basic and it’s - while I admire the vision on the rate [ph] bar survival and I’m just going to ask about the sequential revenue change, where it looks like we lost $300,000 in quarterly revenue from Q4 to Q1 and if you could share with us, what we lost? What type of business did we lose from Q4 to Q1 for that revenue growth?

[Hal Turner:]

Okay, so very straight forward the revenue drop is due to two factors, but the sequential is really focused on the retail customers of our customer Vodafone in Spain. So during the holiday portion of the year, there is always a fair significant end of year promotion, where they’re giving special deals to add a line, special deals for data packages, special deals for voice packages and this is in anticipation that, people are calling more relatives throughout the world, this sort of thing. So it is a loss of that on a seasonal basis that has had some impact on that sequential quarter-over-quarter loss, but there is a more fundamental piece to this and that fundamental piece is the, simple fact that both Lowi which is the second brand of Vodafone as well as some of the Vodafone MVNOs that operate in Spain, notably Lebara and others, clearly they did not experience growth as they had in the past. It is this broadband product set that will reignite the growth in Lowi and that’s what I vaguely refer to as some of the expansion forecast that Vodafone has provided us. Also Lebara who is really an ethnic focused market operator in Spain, they have been able to negotiate through Vodafone and gotten some additional product capability and speed capability and pricing capability that will allow them to grow again. They have notified us of a large marketing promotional event that they will start in the summer, run throughout the third quarter so those are the two primary reasons. One is the seasonal loss of retail customer revenue because of the promotions and second, the slowing of growth of those operators that I mentioned who operate also with our platform but now we believe the renewed vigoring growth that’s coming from a number of initiatives including our product and also pricing that Vodafone is offering. Vic, you want to add to that. Vic?

[Vic Bozzo:]

No, I think that’s very - kind of sums it up. But we also are working very hard with them as they launch new initiatives and candidly the Vodafone roaming service is a global MVNO nature, so gives us lot more access to lot more subscribers.

[John Philip:]

So I guess so to the best of your knowledge there is no - it’s nothing to do with Pareteum or the service that was - have led to the reduction in rev. it’s more of.

[Vic Bozzo:]

No in fact our service levels, actually have exceeded our previous year in terms of our their acknowledgement of our KPIs.

[John Philip:]

Great. Okay, thanks guys. Appreciated.

[Operator:]

And ladies and gentlemen, this does conclude today’s question-and-answer session. I would like to turn the call back over to Mr. Turner for any additional remarks. Mr. Tuner, you may proceed.

[Steve Gersten:]

[Indiscernible] we lost, Hal.

[Operator:]

He’s still connected. I’m showing.

[Steve Gersten:]

Hal, are you there?

[Vic Bozzo:]

Steve, would you like to me to give the final closing?

[Steve Gersten:]

Yes.

[Vic Bozzo:]

Okay, so my final thoughts. We’ve spoken at length in the past about the many ways we’re working to build our company, your company as we see it. Certainly some of these things like our latest contract are more visible and immediately identifiable than others. The actions we’re taking will contribute to the success and breakthrough. I also want to reaffirm my pledge to you that the entire organization is fully committed and supportive of the go forward plan and attaining demonstrable result and sustained growth. Realization of our vision includes sustaining our competitive advantage and creating great value. It is the long-term we’re focused on. It is especially comforting and encouraging to know that, many of our most important customers and partners including Vodafone and Atalaya are fully committed and standing with us. We continue to advance our business and we’re making progress in the nearly every important metric KPIs as we call it, we can track. But beyond hard numbers, we shouldn’t overlook some of the intangibles for example, why are customers like Vodafone committed to our business? Why are they choosing to grow with us? Why our new customers both established operators and entrepreneurial companies such as THYNGS, [indiscernible] Fox [ph] looking to us as a key enabler of their business. Why are we able to attract the kind of industry talent we have and that we expect to join our company as we grow? To us the answer is clear, the markets we’re addressing are vast and is a state of fundamental change. And Pareteum brings together the vision all things connected, the technology built almost wholly on our own software and the ability to deliver value. People, solutions, pricing, service, quality, services roadmap. To the markets and customers that we serve, our goal now is to continue to move the business forward. Maintaining a disciplined approach to business management. Capitalizing on the global trends, driving a connected world. As we succeed we’re confident in our ability to create value for all of our stakeholders and realize our vision. Any connected device communicating anytime, anywhere, on demand. Thank you.

[Hal Turner:]

Vic, don’t conclude yet. I’m back, I’m sorry, I got cut off. But ladies and gentlemen, you just heard the best example of team mates and team work. Period. Because I cut off and without missing a beat, Vic build in. so thank you very much. This does conclude our call. We very much appreciate it, look forward to hearing from you. And we intend to have another Chairman’s letter out somewhere toward the end of June, sort of mid-quarter update on how we’re doing. In the meantime, look forward to your support. Thank you very much.

[Operator:]

And once again ladies and gentlemen, this does conclude today’s conference. We thank you all for your participation. You may now disconnect.