Pareteum Corporation
Q2 2017 Earnings Call Transcript

Published: 15 Aug 2017

[Operator:]

Good day everyone and welcome to the Pareteum 2017 Second Quarter Financial Results Conference Call. At this time all participants are in a listen-only mode. Later the will be opened for questions instructions will be given at that time. Today's call is being recorded. And at this time I would like to turn the call over to Delic Mira [ph]. Please go ahead.

[Unidentified Company Representative:]

Thank you, Ann, and good afternoon or good evening to everyone. Thank you for joining us today for Pareteum Corporation's first quarter ended June 30, 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 Pareteum released financial results and filed its Form 10-Q for the quarter ended June 30, 2017. If you've not received Pareteum's earnings release please visit Pareteum's investor page at www.pareteum.com. Following the 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 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 the press release are issued today 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 the company.

[Hal Turner:]

Thank you, Delic. We really appreciate everyone being on the phone with us today; greetings to everyone joining us from wherever you are around the world. Well today, the headlines read Q2 revenues of $3.2 million, up 16% quarter-over-quarter, $60 million revenue backlog, up 41% quarter-over-quarter, achieved positive EBITDA and for three and six months ended June 30, and we are the winner of the 2017 Communication Solution Product of the Year Award from TMC Net for innovation. Ladies and gentlemen, this is the very first time since November of 2015 when we have a sustainable momentum building and a very positive outlook for the future of our company. This Q2 quarterly analyst and business update call that we are now conducting is one that reflects our safest drive for success. I think you will enjoy this call, which I tell you upfront is not of the relapse [ph], it's an acknowledgement of the visible positive progress that continues to be experienced by our business and it's an affirmation to you our shareholders that we are intensely driving forward always. So, as we move through this and after my remarks, Vic and Ted will join me in our Q&A session. And during that time they will also have an opportunity to make comments on relevant points regarding our progress. Hopefully you've all had the opportunity to see our earnings release and the filed 10-Q. So I won't read that to you, other than noting a few highlights. So, with that I would like to really get started and dig into this. Pareteum had set out to connect people and devices wireless and wired from anywhere in the world. This is really our vision. We intent to deliver on these by providing the single best unified solutions that fully enables and secures the mobile cloud. We're leveraging the power of our highly disruptive and fully integrated platform to deliver innovation, growth and quantifiable value for our customers. These customer successes will translate into healthy growth and profitably for our company. The foundation is being laid. The building has begun, and the fruits of our labors in having planted the seeds for success will likely be enjoyed for an extend period of time. We've all witnessed a phenomenal growth rate of a few selected companies in our industry. They've proven to be very good at creating value for customers through cloud communication platform as a service, much like we do. The potential opportunity for Pareteum is clear, as is evidenced by the momentum and positive trajectory in our key financial metrics and key performance syndicators in Q2. Pareteum's ability to drive customer success is fueling our growth and seeding this company's long-term value creation. Pareteum's customers solve problems and sees opportunities that translate into increased revenues and new sources of revenues plus they gain reduced cost and operational scaling, reduced CapEx expenditures and in some cases shifting CapEx to OpEx. Plus our customers who use our platforms becomes betters competitors and they can become market dominators. And using our services and ability to innovate it means that they can be very agile and are now equipped to dramatically grow and diversify their customer base and geographies served, this is a materially big advancement for our customers. All of these things are available right now Pareteum's disruptive global cloud mobility platform it's working, our managed services platform it is working and has been working for a long time. And importantly our application exchange and developers' platform utilizing our APIs for creation of applications and even new business models is working. These are winning combination of services delivered from our 100% owned and developed in-house software. You think about this our planet and our world in which we live and the whole industry where we operate are shifting really rocket level speed to new things on a daily basis. New opportunities are arising very fast in IoT, mobile monetization and seamless connectivity. It's our continual product and service development and innovation producing fully integrated turnkey solution that are the keys to having our existing customers, continually reward us with new contracts and extended contracts, and for new customers who want to join the party at Pareteum and reap the rewards of our services. This is what Pareteum delivers. We have built it and we continue to develop it and we will build more of it. It is our customer success platform this is what feeds our future growth with a foundation for ongoing service development and sales successes by addressing clear market needs now and as they evolve with very innovative solutions, we're pleased with our performance indicators in the second quarter of 2017. We did have quarter-over-quarter revenue increase. We can have continued improvements in our adjusted EBITDA and other key metrics and signifying what we believe is the most relevant indicator of our hard work and future prospects is our record breaking $60 million revenue backlog. It will continue to grow based upon our visibility into the sales deals that are pending and the overall sales process. Sales is clearly our focus. The revenue backlog is a rolling forward 36 month snapshot of signed customers and their associated revenues. As you know I mentioned the revenue backlog in a Q1 update Letter to Shareholders. The end of the Q2 backlog of $60 million is a 41% increase over our revenue backlog at the end of Q1, 2017. The same revenue backlog represents approximately a threefold increase over where we were at the beginning of 2016. This is progress at its best, it is at the moment of truth that our customers have voted. Revenue per employee is a key performance indicator KPI that we began tracking in Q4 of 2015. We increased this important productivity indicator by 18% quarter-over-quarter in Q2 to $215,945 from the previous Q1 number of $183,275 year-over-year the revenue per employee is up 183% from the $87,000 in Q2, 2016. And we're up 359% since Pareteum started tracking revenue per employee in Q4, 2015 when it was approximately $47,000. I consider this heroic performance by the team in the most dire, challenging and trying of circumstances. Also Q2 has seen our team greet many customers with the execution of multi-year contracts; you will likely have seen many of those press releases. These new agreements and those that will surely come firmly establishes a pathway to continue to revenue growth and if our team's initiatives play out as we expected accelerated growth is within our grasp. Very importantly, this growth for new deals already signed and expected new growth from those deals that we see coming brings us very high margin monthly recurring revenue services. And that provides a clear quantifiable value and results for our customers, customers win, team wins and this is truly a clear and present opportunity. Our ongoing restructuring and turnaround continues, this remains a very heavy lifting exercise and we simply will not rest until that job has completed and done. Vic by the way calls this our rebuilding of the airplane and flight, he says we're going from a propeller driven by plane into a jet, and I say now we're pretty rocket boosters on it, all while in flight with full passenger seats and without parachutes, but we will do this, it is our pledge. It is this progress that has facilitated our ability to recruit management and sales talent that we believe are some of the best and brightest in our industry. We expect this recruitment to continue as our needs expand, because of sales growth and success base spending that's associated with sales growth. For Pareteum organizational effectiveness mandates that each headcount slot be occupied by highly motivated team mates that are skilled, knowledgeable and have the most proactive attitude towards the company's vision and our success, nothing less will do that context recently last month we were honored to have Laura Thomas joined Pareteum as our second new Independent Director of this year. She will also chair our Audit Committee as a telecom industry veteran with deep domain experiences, relevant executive and key management contacts, Laura has demonstrated throughout her career, a long commitment to building shareholder value and operating transparently. We believe Laura's appointment add significant value to Pareteum. Laura has said to me that she joined Pareteum because she sees how we are uniquely poised to capitalize on the huge and growing market opportunity that's created by the very dynamic and shifting environment of our industry. And particularly she said, because all things connected in mobile as the new normal she sees that we have a winning combination. We fully agree and we welcome aboard Laura Thomas. It is through excellent team efforts that we've achieved the following recurring revenue, generating contracts and new service product launches. Very briefly, we signed the three year contract with THYNGS Wireless. THYNGS will use our global mobility cloud platform for its comprehensive IoT solutions, serving smart city infrastructures. THYNGS serves about 90% of the taxi cab market in Las Vegas and as well the New York City in taxi limousine market area. As a result of subscribing to Pareteum's global mobility cloud, THYNGS is able to save its customers over 50% on their monthly service fees, compared to other alternative and we are delivering superior mobile coverage and metrics previously unseen in their industry niche. This is just one example of how we delivers service solution platforms for customer successes. We believe THYNGS is poised to grow, which means that Pareteum will grow with them. We also entered the Brazilian market with a seven year contracts that includes paid-in-advance fees and committed monthly recurring revenue services. The customer is a leading Brazilian financial and marketing company, that selected our managed services platform through a software as a service agreement in a long-term and hard fought battle. This was a milestone competitive win for Pareteum, we have been fighting this battle, since I joined the company and before actually I joined the company. We expect an increase in the initial contract minimums, which are approximately $2 million into the eight figure range and this is based upon validated projections of 3 million subscribers and devices within a three year period. This win, ladies and gentlemen may go even higher. Brazilian subscriber services implementation is underway and the on-boarding is set begin in Q4 2017. Demonstrating our agility and responsiveness to market needs, we also launched a new product in Q2, it's an on demand hosted, Home Location Register or HLR as it's called in the industry. This is another corner stone for growth since we are disaggregating services, into a use what you need and use it when you needed selection menu via our global mobility cloud platform. HLR is the main data is the main database location of permanent subscriber information for a mobile network. HLR has not generally been available in the market on an on-demand basis. So therefore to utilization HLR services, it required a large investment by communication service providers wishing to deploy wireless services. We have disruptively changed this business model resulting in new customers in just the past few months. More are expected to join us and to use our full suite of services. This is the academy of software as a service, moving CapEx to OpEx and extracting immediate value for those newly signed customers. For market delivery of this new HLR service we signed a global mobility cloud connectivity agreement utilizing a leading UK-based communication service provider. Transaction based revenue on this contract is in implementation and is expected also to commence in Q4, 2017. This customer will use our HLR services to enable subscriber, database management and billing capabilities, sync [ph] our card selection from our software services versus old business model. Just after the end of Q2, in July we signed two more three year contracts with UK-based communication service providers for HLR. Those two agreements together represent more than 50,000 new subscriber equivalents for Pareteum and importantly, those agreements added another $1 million to our rolling forward 36 month snapshot of revenue backlog. We worked hard during the second quarter to finalize the deployment of our full featured 4G broadband services. 4G broadband services launched in July the offering creates a dynamic opportunity and it's attracting new subscribers now and soon across our whole customer base. As it will surely growing in the coming months it will drive new incremental recurring revenues for Pareteum. These services allow our customer base including mobile virtual network operators MVNOs that is, enterprises and communication service providers hosted on the managed services platform. And those on our global mobility cloud to deliver full featured advanced mobile services. These kinds of services are typically only available to subscribers in Tier-1 4G networks or bundle home cable type services. Examples of these services include streaming media, data-rich mobile weather access, IP telephony, gaming services, video conferencing and virtual reality applications. As a confirmation and the industry's recognition of our innovation engine that we've created here at Pareteum. We were awarded the 2017 Communication Solutions Product of the Year Award for our mobile networking software and services by TMC in July, we're very proud of that. We've continued to invest in our future, building the foundations for even greater future growth and we expect ongoing new service additions to our product roadmap in the coming quarters. These new services are designed to deliver innovations that benefit our customers now and as the customer needs will change and they will surely change. Now let's take a very brief look at our Q2 financial highlights. You may all have reviewed our published press release and our 10-Q, which was filed with the SEC for a detailed description of our financial results. So I'll just touch on some of the trending and momentum highlights that are clear indicators of our company's performance. Revenues were up 16% quarter-over-quarter, we expect this trend to continue and accelerate as our revenue backlog is converted into booked revenues and most importantly as we continue to build the sales and marketing team. Gross margins continue to be healthy in the 70% range. Both operating and net losses have narrowed considerably on a quarter-over-quarter basis and even more so on a year-over-year basis. We reported a positive adjusted EBITDA in Q2, much improved over negative adjusted EBITDA numbers in Q1 and Q2 of last year. We improved our cash flow by restructuring a credit agreement with Atalaya Capital Management our senior secured lender. This has resulted in $1,500,000 more cash being available to Pareteum in 2017. In summary, we created a valuable that is dramatically below our comparable companies. This has been a difficult turnaround and a loved turnaround by many in many respects, but we persevered by doing the right things for we have enable to reset the company, its division, its strategy and the way of working being in sales - everybody being in sales, we have changed out the company management almost completely. We have brought people with skills, knowledge and attitudes that are consistent with the vision of this company. We've dramatically reduced costs, we have reset the company to allow it to survive. And we have restarted sales and marketing and we have been successful at it. We have executed for you our stakeholders and we're going to continue to do that. Now I think it's time to hear from your by your questions and as well from Vic and Ted comment as we address your questions. At this point operator Ann please open the call to a few questions.

[Operator:]

Thank you. [Operator Instructions] We will take our first question from Ashok Kumar with Joseph Gunnar.

[Ashok Kumar:]

Congratulations, three part question. First question is on your backlog and I would assume this is contractual estimate for future revenues not yet those declines and would you consider this as a better indicator of your progress to-date net revenues. The second question is regarding Brazil, given you have established this new business model where you are building out MVNO for a financial institution and with potential revenue opportunities in eight figures, do you think this model can be duplicated or replicated in other parts of EMEA? And the last one I think the HLR the Home Location Service I assume that's a significant enhancement to your platform and as indicated three customers have signed on and you see increased momentum for this opportunity attraction with your platform for this particular people case [indiscernible]? Thank you.

[Hal Turner:]

Thank you, Ashok. I would like to recognize that Vic Bozzo to first speak about HLR and Brazil and then Ted will wrap it up with speaking about our revenue backlog. Vic?

[Vic Bozzo:]

Great. Thank you, Ashok. So in terms of Brazil, we absolutely feel this is a replicable model, interestingly enough we are finding that since we have put this contract in motion, we found that there are existing MVNOs, there are existing marketing companies within the region who have come to us and asked if they can join that platform. So we see creating a hub so to speak in these regions as a very good model and it also allows us to continue to build out our application exchange concept around the globe. So we will be doing more of this, we are working very hard in other parts of the world very interesting parts of the world, to build more of these hubs and the advantage obviously is that they are being funded by customers and companies that are either already in this space or looking to add subscribers. In terms of the HLR as a service, it's quite interesting because, by virtualizing our platform from a pure managed service platform into the global mobility cloud, we were able to determine that there are feature sets that had already existed such as HLR within the platform that could be extracted into individual discrete product sets. And so that was really a byproduct of virtualizing our service and putting it on the cloud. So we have seen a strong uptake in that model and actually since we have announced those relationships we found a lot more customers who come to us looking for that same service. And it will be very important as IoT, the Internet of Things takes over because there will be massive amounts of wireless devices that need to be managed in this way and there won't be the need for CapEx in this model.

[Hal Turner:]

Vic, thank you very much and now I'd like to recognize Ted O'Donnell, to address the question on revenue backlog and yes there are contracts. Ted?

[Ted O'Donnell:]

Thank you, Hal. When we go ahead and look at the revenue backlog we believe it creates a full picture about our total revenue to be recognize over the course of the next three years and over the course of the contracts. So, when we look at the company like Brazil, it doesn't really go ahead ink the whole picture by just saying that we're going to be doing implementation revenues over the next six months. Is then we'll go ahead and switch over to on a per scriber basis that we recognize over the course of the contract. Looking at it this way we are able to go ahead and I think we would be properly value the company both software and service companies. We'll go ahead if they trade on a number of different ways we got great ways that we're able to go ahead to determine valuation is on a multiple contractual revenues. So, we go ahead and say that we've grown from $41 million to $60 million over the course one quarter this is a huge jump of over 41%. And doing that I think we're really going ahead and establish our self the company that's going to go ahead be able to generate revenues timely manner over the next three, four quarters and in doing that I believe basically establishing the ongoing viability of the company. I think that should answer your question.

[Hal Turner:]

Great, thank you. Ashok should any follow on did we clarify everything for you?

[Ashok Kumar:]

Yes it did, thank you very much.

[Hal Turner:]

You are quite welcome. Ann, next question please.

[Operator:]

We'll take our next question from Lisa Thompson with Zack Investment Research.

[Lisa Thompson:]

Good afternoon.

[Hal Turner:]

Good afternoon, Lisa.

[Lisa Thompson:]

So, I just want to go through a little bit of statements you made, you talked about - you said that you believed that revenue would continue to accelerate sequentially. What's your feeling about gross margins, will they bounce around and do you feel that also the operating losses will continue to decline each quarter?

[Hal Turner:]

So, Lisa, on the first part of this, we do see revenue increasing. We see it smoothing out, this is coming from a number of small medium size cloud deals as well as the larger deal are baked into this. So our view point is very positive on that. The margins we think will hover around the 70% to 71% range as we reported this time. But it's really depend upon the product mix of cloud and managed services platform and the connectivity to drive those. So, we don't see our margins dipping any lower than the high 60s, but we see quite an opportunity to take the margins up into the mid to high 70s. As far as operating losses, we didn't come here to operate a loss making business, we're driving as hard as we can to profitability not just on an adjusted EBITDA basis, but pure EBITDA basis. And just certainly the commensurate cash flows that go with that and we have good visibility on the progress that we're making and think that 2018 is going to be a banner year as it relates to that. Let me turn to Ted to make sure I have not overlooked anything and now perhaps to expand upon my answer. Ted?

[Ted O'Donnell:]

That was a great answer Hal. We've gone ahead and also seen our operating expenses start to do a lot better. When we go ahead and look at some of the things that cause a little you've alluded to instability before. When you look at the area of other income, there're some elements in there that ebb and flow like in the first quarter we are able to go ahead and get rid of derivative liability. And there was an add back for some of the expense there. So something like that can go ahead of cost, but as it relates directly to gross margins and operating income usually gone ahead and established a clear pathway and our matching of our revenues now with our operating expenses very well and look forward clear pass as Hal said EBITDA positive and operating cash positive. Thank you.

[Lisa Thompson:]

So do you feel that operating income will become less of a loss this quarter or fourth quarter or there's start-up cost for Brazil that will allow that to happen?

[Ted O'Donnell:]

We've continued to go ahead and grow and look forward to that on an annualize basis, we know that's going to happen on a year-over-year basis that will go ahead and happen as well. There may be some start-up cost that are mixed in, but usually these type of start-up cost, we've been able to go ahead and have our clients go ahead pay for implementation. So that will go ahead and allow us to go ahead and continue to be profitable. Now it might go ahead and eat into our margins a little bit Hal alluded to earlier it might ahead and see things get download a little bit 7%, 6%. But having someone go ahead and pay for those simplification is a great thing for us. So we look forward to continuing to grow both as far as the dollar value gross margin and operating income in the future.

[Lisa Thompson:]

Alright. And as I look it seems like every quarter you have a restructuring charge. Is that ever going to end?

[Hal Turner:]

Lisa from my perspective, we are nearing the end, but there clearly are a few things that we're still addressing. But I believe the restructuring charges are diminishing in size. And the combination and the restructuring charges and settlements that we're dealing with clearly have been driving from this working capital deficit. But I think we're pretty close to the end of the restructuring charges. And I guess Ted, maybe you would want to add some to that, but I don't see it increasing by any means.

[Ted O'Donnell:]

The lion share of the restructuring costs were completed to the third quarter of next year. So if we go ahead and look at sort of a demarcation point. If you look at October 1st of last year and if we look at the trailing nine months going back to October 1st, it would be adjusted EBITDA positive. Now there will be some restructuring costs we find that our financial statement users by breaking out and showing these costs that are restructuring in nature relational to settlement that it's helpful for them because it also goes ahead and shows the how we're going to pick up going ahead and be doing in the future much of these one-time costs.

[Operator:]

We'll take our next question from George [indiscernible].

[Unidentified Analyst:]

Hi guys. Can you hear me?

[Hal Turner:]

George, hi. How are you? Yes, we can hear you fine.

[Unidentified Analyst:]

Good, thank you. Nice quarter guys, nice quarter. A couple of questions, how do you see and I know you've touched on it earlier Hal, but how do you see and Vic how do you see the product mix of the revenues going forward. I mean we have the cloud platform, we have the more traditional higher ticket items. I am trying discern IoT cloud and the more traditional stuff, how do you see the mix of that going forward over the next two or three years?

[Hal Turner:]

George, as you I think are aware from looking at our filings all of it effectively backward looking has been managed services platform. So we began in Q1 to add cloud services to that. We believe that as we move towards the end of 2018, that we'll see cloud revenue representing as much as 10% to 15% of the business. And we hope to see IoT revenue in the 3% to 5% levels of the business. Those are sort of some indicative high level viewpoints. Now if a lot of this has dependency on how our channel partner customers do. So for example you've heard us talk about THYNGS, T-H-Y-N-G-S the company. So a lot of that can be characterized as IoT business, but it also uses the cloud. So we've got to internally make some decisions on how we're going to characterize a lot of this, but by pure definition the cloud will be the fastest growing element. By pure definition, the IoT piece has the largest potential, but the monetization of the IoT piece is smaller compared to the monetization of the cloud and smaller compared to the monetization of the subscriber on the managed services platform. So all-in-all, we see hopefully to get the cloud into this 10% to 15% range in 2018. Vic, do want to add to that?

[Vic Bozzo:]

Sure. So we're very cognizant of the mix and obviously the margins are generally the same, but the rapid deployment on the cloud is an advantage. Also the sales cycles on the cloud are typically shorter. So, we are targeting typically one manage service deal for every four to five cloud deals. And so we're building our model that way and so far it's been pretty active.

[Unidentified Analyst:]

I mean clearly the managed service deals are the bigger revenue ticket deals, but I can see us getting more reorganization for the more hit if you like if that's an appropriate term for the IoT cloud deals. So I think it's interesting in a short-term, I get the sense, the higher revenue comes from all the traditional managed service, but the more visible the things that will get more visibility and following will be the smaller deals, but the IoT and cloud deals, and I think that's indicative of what's going on in the future. Okay. One more question - two more questions if I can very quickly. Can you and I appreciate you can't share any customer names, but what will be the typical profile of an HLR customer in the UK? You mentioned the UK service provider, what are their characteristics, what they look like?

[Hal Turner:]

Vic, you want to take that, please.

[Vic Bozzo:]

Sure, one other comment here, last question I wanted to make is that well cloud deals and cloud customers feel like they could be smaller from the beginning, don't underestimate the fact that our customers also are application providers, and those types of customers can scale dramatically and rapidly to lots of subscribers. So, we're viewing what we're doing as the mobilization of not just the service provider market or the MVNO market, the IoT market, but also the application providers who all need to get a mobile strategy. So, we believe there can be lots of subscriber maybe dramatically more subscribers on that side. The profile of the customers for the HLR as a service are they're traditional carriers, many of them are in the either the voice over IP space or the application space, and in - traditionally they would have to go out and spend large CapEx dollars to run the HLR. But they would also need to tap into a network that's already connected - that has their HLR connected to the world. And that's the big advantage that we have today in that service that our HLRs are already connected to all the carrier service provider. So, the typical structure would be an application service provider, a carrier service provider, voice service provider and many of these are pretty well established companies that have been in this market for upwards of 10 plus years.

[Hal Turner:]

Vic, let me add one thing for George. George, we were talking about managed services, we're talking about cloud, we're talking IoT, but Vic has touched upon something that is really fundamental to long-term success in our opinion. And it is the developer community; you've talked about application developers. But the tool to enable those will be our APIs and the developers' toolkit that have been opened up. And that is a clear focus to have us be able to have people create their own businesses, their own application and their own used cases within their customers within their own businesses. So, that's going to be a huge growth area, we embed that and counted as IoT but it's really a separate segment.

[Unidentified Analyst:]

Okay, I understand that. Thank you for that. And it's clear to me the fact that Pareteum owned its own IP is perhaps one of the key distinguishing differentiators for you. And at least and that's my last question, it's actually about the backlog, you say $60 million over three years, do you think of that - how do you think of that is that an even split 33% per year? And how would you characterized it across IoT, traditional managed services, channel partners, et cetera?

[Ted O'Donnell:]

Okay. So, if you take a look at the growth number of $60 million, the way we look at this is about $45 million of that over the coming three years is associated with managed services platform. The remaining $15 million is the ramping of the initially cloud customers, but it certainly cloud go higher. I also want to note again just for reaffirmation, we've chosen 36 months as the forward looking range on this, but in most cases we're dealing with customers who are signing five year contracts and in some cases seven year contracts. So, there's actually more at the end it, we're just not looking at it that way. So, roughly the way I'd just outline it as how it would be split between managed services and cloud. And quite frankly, we haven't broken out the IoT portion of that, which I will consider to be additive as it is layered onto that.

[Unidentified Analyst:]

Okay, great. Thank you, impressive. Good quarter guys, thank you for taking my questions.

[Hal Turner:]

You're welcome. Ann, next question.

[Operator:]

At this time I'll turn the call back over to Hal Turner for any additional or closing remarks.

[Hal Turner:]

Were there any other questions, we're happy to take another question or two if there are.

[Operator:]

One moment. And there are no further questions.

[Hal Turner:]

Alright and thank you very much. So, as we conclude this, I want to leave everybody with just a few thoughts, you are shareholders have witnessed to turn around that the team has implemented over the course of 2016 and well into 2017 and it is ongoing. We are surely going to continue to improve this business every day. We thank each of you for your support, your patience and your understanding during this time. We believe that you know how hard this team has worked and how diligent and never facing hard work has been and how it's preserved our business operation. And now may have the ability to create sustaining long-term value for all of us. During this second quarter, you've begun to see the inescapable positive result of this turn around. The moment of truth is always in front of a customer when you ask them for the sale and we are all on sales. These moments of truth have been a litmus test and have provided strong indications of the tremendous potential that Pareteum holds to achieve its vision and that's enabling them serving all things connected wired or wireless. One of the ways, we've achieved this vision is by providing, what we think is the single best unified solution to the problems of fully enabling and securing the mobility cloud and all the services required by communication service providers, enterprises and their customers including the developer community, which I just briefly touched upon and integrating our smart APIs. The pace at which we've been signing long-term contracts with customers and that are really leaders in their own geographies and industry niches is a testament to this. We certainly expect the rate of the sales to continue at an upward trajectory. I want knowledge and thank our entire team for their hard work leading up to and during this second quarter and that especially includes our large customer technical support teams based in Spain and our professional sales team under Rob Mumby's very capable leadership. These with the people that are creating our future every day and with their successes and all of these teams report to Vic Bozzo who lead by doing hands on is hopping on a plane as soon as we hang his phone up to go to Spain. The same goes for our financing cooperating teams led by Ted O'Donnell and Alex Korff every day. They and their teammate redefine the term all hands on deck everything that needs to get on, gets on with a can do attitude by this unit. Every person who has the privilege of being on the Pareteum team demonstrate that they take all individual and very personal responsibility for the customers' journey with our company whether it's a bug fix to a billing run or a service demo or a new proposal it really doesn't matter this team gets it done. So, our entire team from my Board to the see sweet and every single team aid at Pareteum is committed to building a company, it's your company. We look this as to pursue what we see as a true multi-billion dollar opportunity. This is the pent-up value that we think is here, that's going to be unleashed. So we hope that you will look forward to the more good news that's going to come and in case if there is any doubt just a little bit our pair phrasing to an old song and speaking to Vic and Ted and Alex and Rob and all of us and all the teammates we are still excited and we are not going to hide it and we're going to gain control in the market. Now it's not on the pointers tune, but you get the point. So stay with us, the best days are ahead, we are going to space with this company, so checkout our new website and you will see. So let's enjoy journey together. And Thank you all very much this concludes our call. Ann over to you.

[Operator:]

And again this does conclude today's conference. We thank you for your participation, you may now disconnect.