Pareteum Corporation
Q2 2016 Earnings Call Transcript

Published: 17 Aug 2016

[Operator:]

Good day and welcome to the Elephant Talk Communications Corp. 2016 Second Quarter Financial Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Valter Pinto with Elephant Talk. Please go ahead, Sir.

[Valter Pinto:]

Thank you, operator and good morning. Thank you for joining us for the Elephant Talk Communications 2016 second quarter financial results conference call. On our call today will be Hal Turner, Executive Chairman, Gary Brandt, Chief Restructuring Officer; and Pat Carroll, President. As is customary following management’s discussion, there will be a Q&A session open to all participants on the call. Before we begin, I’m going to review the company’s Safe Harbor statement. Remarks made on this call may contain 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. All forward-looking statements are inherently uncertain, and they are based on current expectations and assumptions concerning future events or future performance of the company. Listeners are cautioned not to place undue reliance on these forward-looking statements, which are only predictions, and speak only for the date hereof. Evaluating such statements, perspective investors should review carefully various risks and uncertainties identified in this conference call and the matters stated in the company’s SEC filings. These risks and uncertainties could cause the company’s actual results to differ materially from those indicated in the forward-looking statements. With that, I would like to turn the call over to Mr. Hal Turner, Executive Chairman of the company. Hal, the floor is yours.

[Hal Turner:]

Thank you, Valter. Good morning, everyone. Thank you for joining us today. And I’m especially pleased that Gary Brandt and Pat Carroll could join me on this call for their remarks later. And we also look forward to taking your questions in just a bit. Earlier this morning we held our Annual General Meeting of shareholders and I'm very, very pleased to report that our Board slate, our approval of auditors, our additional share authorization, our reverse split authority and the authority to change the name of the corporation to Pareteum carried substantially. Now that we've received a shareholder approval, it really highlights major aspects of our capital plan and it becomes much more attainable force over the course of the coming weeks and months. The options that we have for raising capital now are much more plentiful to us. Without the proxy vote for our options would have been very much less attractive and limited, so we want to thank all of our shareholders, our senior lender, our customers and our employees for the support. Regarding financing, we've announced that we've reached agreement in principle with our senior secured lender to increase and restructure the existing $6 million secured loan. Under the terms of this second amendment that has now closed, our senior secured lender will increase the loan facility by over $1 million, waive the company's existing defaults under the financial covenants and will reset the agreed maturity date to at least December 31 and it has provisions that could extend it even further. Our capital game plan will now progress and this is important to us because we've been really operating with our accumulated working capital deficit in a zone of insolvency that almost goes back to 2015 and prior. And while we have not had the results that we had expected from the sale of ValidSoft, it certainly has impacted the way we've had to operate and manage our cash and pay our bills. We have raised some equity capital during the first half of the year, but it was unfortunately insufficient to address the accumulated working capital deficit and to allow us to completely restructure the organization. This also was enhanced by delay in closing new debt and these were for reasons that were beyond our control, but it also exacerbated the strain on the company and it clearly placed us at least in the eyes of our senior lender in this zone that I referenced. Our ability to address and ultimately fix these matters is really based on several things. First and foremost with the shareholder approval of the proxy items that we received this morning, particularly the share authorization and the reverse split authority. Also important in this is the cooperation and support of our senior lender, which we have gotten and we continue to nurture that relationship and our largest customer has shown strong support for us now and as we will go forward. And I'll speak more about that in a moment. It gives me really great pleasure to confirm that we've reached this agreement in principle with our senior lender for the restructuring. It gives us this what I think as a significant comfort level to all of our stakeholders. It also now gives us a very solid foundation to execute on the ambitious restructuring plan that we started late in 2015 and the growth strategy, which is the most important piece, which now has the opportunity to begin to unfold in the latter part of the year. Our senior lenders and customers have told us and they continue to tell us that they've been very impressed with the work and the professionalism of the management team and those who work tirelessly to rebalance this business so that it is sustainable. I want to take this opportunity to thank not only Pat and Gary, but all the members and team colleagues with their noteworthy leadership and contributions to our worthy mission and especially our colleagues in Spain, who support all of our customers through the operations out of that business. We now turn our attention to completing this restructuring as I've talked about, securing the growth capital to accelerate and relaunch. This becomes the most exciting phase to realize our vision, and the surrounding mobility platform and cloud services that include messaging and security, which are part of that vision. It becomes possible now as we segue to funding the needed growth capital and we now have the tools based upon the shareholder support to realize the vision. We thank you all for that. I'd like to share a couple of comments and perspective that have come from our largest customer, Vodafone. And in the words of the executive leaders, we're told that Elephant Talk and Vodafone Enabler continue to strengthen their partnership and they do view it as a partnership. They say they're impressed with the continued performance of our Elephant Talk platform in providing the services, they also echo that ET’s management and the restructuring efforts, which will provide the real opportunities for sustainable growth are sorely needed and supported by Vodafone. This is very important. Already, Vodafone says that last year they grew their subscriber base on the Elephant Talk platform by 9% and they have growth aspirations for the coming year that are almost a 50% lift in the number of subscribers. This clearly translates into new revenue for Elephant Talk. Vodafone also continues to innovate and they're looking forward to working with Elephant Talk to evolve our platform to a truly global cloud platform that is exactly fitting with the strategy that we put in place. Vodafone also says that they have new technology projects and developments in the pipeline, which they expect will be leveraged wider within Vodafone and certainly our expectation is that we will drive these from our platform as it evolves. So this brings to us a level of stability of the company with this move with our senior lender and with our large customer. And on the platform itself, we continue to meet and typically we exceed the contractual performance KPIs for our customers. However, I do want to caution that a lack of appropriate resources including our inability to meet the July payroll did increase some network risk as well as created someone unwanted employee attrition of some of our key selected employees that are important to us. The accommodation that we've reached with our senior lender helps us mitigate the specter of more serious risk and the support that we have from our largest customer also helps in that. With the support of our shareholders through the expected new capital raise initiative coupled with eliminating our burn, we can now manage through the working capital deficits and attract and retain the good quality people that helped build this company and in some cases through no fault of their own experience the throes of a company that unfortunately historically had too many people and too much cost for its actual revenue. And once it lost its largest customer in Mexico certainly steps could've been taken a little bit faster. We are now closing the door on these events of the past. We're opening the door and looking through the window of the vision and the mission that we have. So that really leads me to what I think is this great vision and it will be the great vision of the approved name that will be marking the change of our company in many ways, Pareteum’s vision. The industry we are in, the telecommunications industry, has been divided among the communications service providers that own the network that’s like our largest customer, the subscribers and also the application providers who use that network, Pareteum hold a unique software and apply technology position to be able to drive value for our customers in each of those areas. The communication service providers and enterprises, which is where we are headed. This will allow us to turn potential competitors into partners. Pareteum is developing cloud-based mobile messaging and service security platforms that have patented voice biometrics and authentication to build value from the opportunities. Our straightforward vision is to enable and secure communications, transactions and applications with the connected world via our globally deployed cloud services and make no mistake, this fits precisely with the vision of our largest customers. Our mission therefore is to open up to the enterprise and the retail world mobile applications and enabling services that create value on demand with trustable secure reliance in communications. To achieve this, we're focusing our business strategy around three concepts and three market realities. These three elements that form the basis of the Elephant Talk business are our mobile cloud, a core element of our capability because that's how we built the business, it's the foundation of the business; our programmable messaging cloud, this is our capability using application programming interfaces to use sound software technology and really create value applications. Later, when Gary speaks, you will hear him use a term that he will explain, it our uberization of the cloud through our technology. Also our security and authentication platform will bring trust to all of this. So over the next 90 days, we've set some high priorities. Number one is to attract additional growth funding. That's going to assure that we have the best and most skilled people in every job within the company that counts and that counts for providing services to our customers and fulfilling the mission for our stakeholders, our lenders and our shareholders and accelerating growth. We expect to eliminate the attrition that's been based upon overarching questions both of employees and others of our company's viability. And not fully having understood or appreciated division of the direction. We’re really 100% committed to making this reality with our large customers because it is their strategy. It always works best, we believe, when you listen to what your customers say. And we observe that that's what Trulia did and they've been rewarded in their post-IPO with a 20x multiple, that’s the market cap based upon revenue multiples. We actually think that this team and the vision and strategy that we’ve got and define people that are on the ground and those that we expect to bring into the company can probably do better than that. So how will you our investors and our stakeholders know whether success is being achieved. Well, I think you're going to start to see some things that you haven't seen before and I think this is really found in periodic announcements of our momentum in the market and it will be evidenced by such things as successful new funding where we've got our use of proceeds to complete the restructure and to grow the business finally having the resources to do it. I think these periodic announcements will talk about new additions to our team to lead sales and to lead technology expansion and development and operations, new brands added to our portfolio. This is to realize the vision of the communication service providers and the enterprises. We expect that the achievement will also potentially over the coming months and quarters include some accretive M&A looking at software and technology and really finally getting to the ability to look at buying technology and capability versus building it and opening up new markets. We also want you to watch the metrics. Look at our revenue per employee. Look at how the subscribers grow. I've already shared with you the forecast of our large customer. Look at how our EBITDA will change. So we believe all of this will also come forth in success that's measured by others have strategic interest in Pareteum. So we're very excited about this. Our team has solidly locked arms together. And I'd now like to turn to Gary and Pat for their comments before we take your questions. So let's get started with Pat. Pat, I know you’ve been on the phone all morning and you get some prospects for some excellent progress underway and would love you to share your comments right now.

[Pat Carroll:]

Thanks, Hal. So, since assuming the role of the President, I can safely say that the understatement of my life is that I've been busy. So the primary focus has been on our revenue generation across the group, in particular the analysis and identification of the key targets within the existing pipelines. The result has been that alongside our most important client, Vodafone Enabler Espana, we have identified significant revenue opportunities in particular within the ET pipeline for multimillion dollar contracts. On the ET side, our primary focus therefore is to ring-fence the needs of Vodafone Enabler, concentrating and ensuring that we observe compliance with our service level obligations and working to put in place a plan to achieve operational excellence. In this context, we continue to perform strongly at Vodafone Enabler with several successful migrations and good service levels against our key performance indicator measurements in many cases exceeding. In addition, the LOWI deployment continues to perform well and Vodafone Enabler continues to grow the subscriber base. So against this background, Vodafone Enabler discussing new projects with us, including a smart network evolution of our platform and details of which we hope to be able to share soon. Outside, Vodafone Enabler, we've identified additional significant projects including a JV with our Cleartech in Brazil. This relationship has been in place now for a number of years, but was held back for regulatory and other reason. I'm delighted to report that discussions are now in advance stage, which we hope will result in a multimillion revenue opportunity in the near term. The JV would all see Cleartech acting as the MVNE and one of their key clients acting at the MVNL. In the Middle East, we’ve identified a major multimillion contract and JV with shareholder and hosting agreement provisionally signed in June for conditional upon the customer’s receipt of the regulatory license and the MNO contract and of course receipt of the initial setup fees, which we anticipate in September. Also in the Middle East, there's been renewed activity with Axiom and Zane [ph]. Again, a very significant multimillion dollar contract for ET, which is at an advanced stage and only now conditional under regulatory license. A further update will be provided in September. On the ValidSoft front, I’m delighted to report that the VS solutions include in our voice biometrics capability are now productized. This means that our development costs are sunk and we can now focus the majority of our efforts on sales and marketing. We now have a number of live clients all running well in production, including Newcastle Permanent Building Society in Australia, CompuLondon [ph] Society in the UK, our British Telecom deployment through our relationship with BlackStratus, a U.S.-based leading provider of security information and event management solutions; Convergys, a large U.S.-based corporation who have deployed our voice biometrics capability for remote agent authentication and who have now commenced a broader rollout of our technology. In the UK, our Device Trust solutions continue to perform very well through our partner Fair Isaac company FICO and I'm delighted to report that our solutions are now providing protection to over 17 million bank customers in the UK. Our relationship with our key channel partners AurionPro and ImageWare Systems in the U.S. continue to strengthen with deployment through these channels anticipated in 2017. Out of key targets close to contract include a major European bank in its final functional testing with a decision on the deployment expected in Q4. Western Asia, we're working with an institution who is seeking to deploy a mobile money and remittance transfer capability utilizing ValidSoft voice biometrics and our multifactor authentication platform. Finally, I’m also delighted to announce that we’ve execute a contract with ePlata with a press release to follow shortly. ePlata our U.S. business focused on multi-currency digital wallets and payment ecosystems empowering the unbanked population through voluntary payroll government and nongovernmental income. Their initial target market is Mexico, a significant addressable market and it’s on rise. And ValidSoft was chosen because of our advanced mobile voice biometrics capabilities and our multifactor authentication platform. I would now like to turn the call over to Gary for his perspective. Gary, over to you.

[Gary Brandt:]

Thank you, Pat, and thank you, Hal. We're also joined by Erik Kloots, our Principal Accounting Officer. And jumping in here, we have successfully completed two phases of a three phased restructuring strategy including actions that we deem critically necessary to improve our business. Excluding ValidSoft, we did come within $60,000 of EBITDA positive in June of 2016. We are now in the third phase of our plan and access to capital to invest in growth initiatives is paramount to both complete the restructuring and fuel the growth initiatives. In November of 2015, we had 264 employees. As of March 31, 2016, we had reduced our headcount by 69 people to 195 and by another 41 heads to finish the second quarter with 154 full-time employee or a full-time equivalent. 20 of these departures were voluntary. As we have previously disclosed, revenue per employee is a key metric we’re now monitoring closely. At the end of the third quarter 2015, revenue per employee was 47,000. At the end of the second quarter 2016, revenue per employee was approximately 87,000. Work force reduction expenses, primarily related to employee severances and asset write-offs totaled $0.2 million for the second quarter of 2016. For the seven-month period from November 30, 2015 to June 30, 2016, workforce reduction expenses totaled $2.1 million. These restructuring activities yield pro forma cumulative operational expense savings of $6.6 million on an annualized basis from payroll and consultant fees alone. By the end of 2016 third quarter, even including ValidSoft operations, we expect to be in a modest operating cash generating position, creating the foundation for material organic growth, all will never wavering from the understanding that we must protect and grow our existing accounts and continue to provide excellent service. Turning our attention to our second quarter results for the period ended June 30, revenue for the second quarter and six months year-to-date totaled $3.3 million and $6.5 million, respectively, compared with $19.2 million and $24.3 million for the same period the year prior, respectively. The decrease for both the quarter and six months year-to-date was primarily attributable to the loss of the Iusacell contract. Excluding the impact of Iusacell for 2015 second quarter and six-month year-to-date revenues declined 15% year-over-year from $3.8 million to $3.3 million and $7.7 million to $6.5 million, respectively. Cost of service for the second quarter 2016 totaled $1 million compared with $1.4 million for the same period the prior year. General and administrative expenses for the second quarter 2016 totaled $2.2 million compared with $2.7 million for the same period the prior year. Work force reduction severance cost during the second quarter 2016 was $0.2 million. Excluding these restructuring charges, the general and administrative expense decreased by 26% year-over-year. Net loss for the second quarter 2016 totaled $2.8 million compared with net income of $9.5 million for the same period the prior year. The reduction is mainly attributable to the absence of the Iusacell revenue in 2016 and the impact of the restructuring charges in the second quarter of 2016. With respect to the New York Stock Exchange compliant letters we’ve received, we received two deficiency notifications from the NYSE in relation to shareholder – shareholders’ equity. And so in one particular case, we were – we fell below the $6 million threshold for shareholders’ equity at the end of the first quarter. We are still below that threshold at the end of the second quarter. And in addition, by missing payroll in July, we were deficient on two accounts. We’re working closely with the NYSE to develop and implement a remediation plan and ET, our Elephant Talk will submit this amended remediation plan this week. The programs initiated within the company’s largest customer to increase subscribers in their second digital brand and subscriber count has grown for three successive months. So we are seeing some growth within our existing customer base. On a product differentiation side of things and the reason why Hal and I are so excited and Hal alluded to this is, the company has secured patents, which allow the company to migrate subscribers from a given network to our own network without the need for the subscribers to change their SIM card or their Subscriber Identity Module card. This allows for a seamless and for the subscriber, a completely transparent migration eliminating the associated churn and severely reducing post-migration issues, in addition to yielding savings by not having to issue new SIM cards. This represents a critical step in the uberization of mobile communications, where the customer controls the network. This is what gets us so excited about the prospects for Elephant Talk to some of this technology that we have and the ability to implement this across not just the carrier space, but increasingly into the enterprise space. I’d be now happy to turn it over to questions. Thank you.

[Hal Turner:]

Thanks, Gary. Thanks, Pat. Those were really very good remarks and we do look forward to questions from anyone. Valter back to you.

[Operator:]

Your line is open Mr. Pinto.

[Valter Pinto:]

Thank you, Hal. Operator, please open up to – the call for Q&A.

[Operator:]

Thank you. [Operator Instructions] And we’ll go now to Lisa Thompson with Zacks Investment Research.

[Lisa Thompson:]

Good morning.

[Hal Turner:]

Lisa, good morning. How are you?

[Lisa Thompson:]

All right. So I have a bunch of questions. First off, how do you spell the name of your new company?

[Hal Turner:]

P-A-R-E-T-E-U-M, pronounced Pareteum.

[Lisa Thompson:]

Latin? Okay.

[Hal Turner:]

Yes. Just think it’s a mash up between the Pareto principal and the word team.

[Lisa Thompson:]

Great. And I have to be Googling this one. Okay. First, let’s talk about the financing prospects, because obviously that’s the most important thing on everyone’s mind. You said that the – the vote this morning changed some parameters of what you’re allowed to do. Can you describe what you couldn’t do and what you can now do and whether or not you have things lined up just waiting for this change, or how long is this process going to take and what are the options?

[Hal Turner:]

Okay. So I’m going to give you just a couple of high-level remarks and then I’m going to turn to Gary for some detail. The number one thing that was approved this morning was the increase of our share authorization, going from 250 million shares up to 500 million shares. And this is very important because of the number of shares fully diluted that are outstanding. We now have the room to execute on equity offerings that we are contemplating and that are actually in several ways underway, and you’ll hear more about that in a moment and perhaps Gary will give you more detail. But without that, we were really much more dependent on debts. And we don’t think it’s right that the lender should carry this business. We think it’s right that the shareholders should carry the business forward. And hence the additional share authorization capital allows us to structure some offerings to address that. Gary, let me turn to you for some additional context and color on that please.

[Gary Brandt:]

Hal, I think you pretty much covered it. But Lisa, it’s really having access to enough authorized share capital, so that we can whether it’s through a raising of additional funds to complete the restructuring and to invest in the sales and the growth of the company, but it’s also, so that we can do M&A transaction. We have a very good portfolio of technology. There are some very exciting complementary technologies out there as well. So it’s a combination of both raising capital, but also potential for aligning ourselves with other businesses as well.

[Lisa Thompson:]

So what would be the timing on this? And I’m kind of guess that the bankers have something just ready to print out, waiting for this authorization, or am I wrong?

[Hal Turner:]

So, Lisa.

[Gary Brandt:]

Go ahead, Hal.

[Hal Turner:]

Go ahead, Gary. I won’t talk over you.

[Gary Brandt:]

Go ahead, Hal.

[Hal Turner:]

All right. So, Lisa, clearly this has been top of mind for us. We have preparations underway. I think it’s going to be in the course of the next several weeks before we actually are at any type of announcement or execution stage, but make no mistake about it. So we have our eyes set on a big prize to really complete the overhaul of the balance sheet through the actions that we expect to take in the next quarter or two. Gary?

[Gary Brandt:]

Yes, I would only add that, Lisa, clearly, the announcement we made last evening with regards to some liquidity and the strength of our relationship with our largest customer can only be sustained if we continue to strengthen our balance sheet. So we have alignment and support from two of, perhaps, the most important camps. One is our biggest customer, two is our lender. And with this vote that we received today, we feel that we have the support of our shareholders. And it’s only a matter of time now, where we kind of fill that out and make sure the we have the appropriate balance sheet to carry on the business plan.

[Lisa Thompson:]

Okay. So we’ll look for something over the next few weeks through the month to see what’s going on.

[Hal Turner:]

Yes.

[Lisa Thompson:]

And then as far as the reverse split, is that something that happens right away or how – [indiscernible]?

[Hal Turner:]

It’s very much tied to how we see the need for it relative to one, the closing the door of the past, the relaunch of the company going forward with our new name, as well as addressing issues with the New York Stock Exchange that Gary has referenced. So we haven’t made a definitive decision, but we now have the authority, if it is needed and we’ll be in very close contact with the remainder of the Board in addition to myself to discuss that. But clearly it’s a tool that we needed to have if we need to use it. Gary thoughts on that additionally?

[Gary Brandt:]

Yes, Lisa, the only threshold that that is of concerns to the New York Stock Exchange would be a $0.06 threshold. Otherwise, if the stock is trading strongly, there’s no particular incentive for us to do something. However, as we grow our business and if there are opportunities to be attracted to institutional shareholders, clearly having a higher price make some sense as well. So by having this in hand, there’s no urgency, but the Board can make the appropriate assessment in due time.

[Lisa Thompson:]

Do you think when you submit the plan to the New York Stock Exchange, they’ll give you some sort of date or something that you see should [indiscernible]?

[Gary Brandt:]

No, no, in fact, that’s why I said, they’re not – they just want you to have the tools available. So that you can carry out the plan and that you’re not caught in the middle of it, because if we are dependent upon an equity raise and our stock falls below the minimum threshold that would inhibit out trading and inhibit our ability to raise capital. So it’s only to the extent that that it is complementary to your plan.

[Lisa Thompson:]

Okay. And back to the SIM card thing, you’ve got a patent for it, does that mean now you’re going to start doing this, or have you been doing this, or what’s the status of that capability?

[Gary Brandt:]

Hal?

[Hal Turner:]

Yes. So, Lisa, the capability has been in use to-date. And what that means is that, when a customer like our largest customer in Spain Vodafone enabler, when they sign up a new MVNO mobile virtual network operator who is using the Vodafone network to bring their own MNVO subscribers to the market. If any of the Vodafone subscribers go to that MVNO, they don’t have to change out their SIM card to go to the MNNO network or even to go to a second brand of Vodafone. So that is a capability that is very important, because it reduces churn and it makes it easy for the end-user. But now if you take that basic capability, and when we use the term uberization, everybody knows that Uber basically is a piece of software that operates on the Twilio network and it uses SMS messaging capability. So just to, if you will allow me for a moment to use Uber basically, you’re looking at your smart phone and GPS says, you are at this location. And that software using SMS text messaging locates the nearest car, the most efficient car based upon those factors and a text message basically unites the two of you, the driver and the car through that software and it gets dispatched. Well, think about a situation where you as a smartphone user that car is the analogy for a network and you’re moving around the city or you’re moving around the country. And now with this capability our swap free SIM card capability you – as we deploy this, we’ll have the opportunity to be connected to the most efficient network on demand to have the best quality network on demand, or to be able to determine what price you want to pay for your network on demand. And this is a very fundamental very, very important capability, and that’s how we will take this concept of uberization. So just basically think of the car is the network and now we can optimize our users to the right network versus the Uber getting a car and driver with you. Does that help to explain it.

[Lisa Thompson:]

Yes. So right now that you don’t have to swap SIM card right now…

[Hal Turner:]

That’s right.

[Lisa Thompson:]

…But yet you have to take that to create this kind of the software defined network for customers, but you don’t at this point have a customer for it?

[Hal Turner:]

No, no, in fact, when I referenced the words that our large customer has said about innovation and the direction of going in with our global mobile platform, this is a prime example of what we intend to do together and then certainly through our cloud platform will become available to other carriers and other operators in noncompetitive territories to Vodafone.

[Lisa Thompson:]

So is this what we’re talking about when they say they have plans to grow their business 50%, or is that some other?

[Hal Turner:]

Actually no that we haven’t even touched that the 50% mindset is their focus to grow subscribers in their primary market through their digital brands LOWI, their MVNOs, Lebara, they also served BT in Spain. And so it’s primarily from their existing MVNO base, if you will. However, the innovative ideas look at new territories for them and surrounding European countries, as well as this globalization of taking this Elephant Talk platform branded Vodafone into other places of the world to facilitate communication to facilitate roaming and to facilitate the ability to stay on the Vodafone network at all times using the enhanced capabilities of our platform. Those are some of the ideas and that’s what they refer to is – as the innovation. So subscribers really are looking at their existing and expansion of existing customers within their current market, the innovation is well on top of that. So I think you can judge why we’re so excited about not only that relationship, but many of the things that Pat talked about, in terms of the Middle East, in terms of South America, and clearly, our ability to move this into the enterprise, it opens up doors for ATM that did not exist before. So when I figuratively say, we’re closing the door on the past we are. We are looking towards this globalization, this platform that includes three major elements, the mobility platform built upon our existing technology delivered through a cloud, the messaging technology layered into the cloud making us, well, we’ve got access to it now, but it makes us clearly in the minds of others when we position it this way very much looking like Twilio, and clearly the ability to bring trust and authentication to that. It says that we can offer it in a way that’s rock solid and robust, so it can be used by insurance companies, be used by banks, and be used by many others as well as our enterprises, as well as our communication service provider customers. But I better shut up, I get too excited about this. Pat will talk to you some more about it.

[Gary Brandt:]

Lisa one more question or…

[Lisa Thompson:]

Yes. That was just about it. So just on sequential revenue growth just based on what your customers are doing, do you expect it to be up sequentially?

[Gary Brandt:]

So from this phase now, obviously it’s deteriorated year-over-year, excluding the Iusacell business, but that was heavily related to the restructure. At this point, the restructure is pretty much coming to the bottom of the V. And as I said on the – in my remarks, we have started to see subscriber growth from our largest customer, that’s a good sign and indicative of where we can take the base revenue. But our interest is in raising capital and launching some of these other growth initiatives as well.

[Lisa Thompson:]

Okay, great. Thank you. That’s all my questions.

[Hal Turner:]

Thank you very much.

[Operator:]

We’ll take our next question from George Kasper [ph] with – who is a private investor.

[Unidentified Analyst:]

Thank you for taking my call.

[Hal Turner:]

You’re welcome. Thank you. Yes.

[Unidentified Analyst:]

Hal and team, congratulations. It almost feels as though we’ve snatched victory from the jaws of defeat. If I just listen to your very eloquent prepared remarks on that Pat, it feels like once again the world is our oyster almost. So as a minimum for that, thank you very much as a shareholder, so let me first say that.

[Hal Turner:]

You’re welcome.

[Unidentified Analyst:]

I’m intrigued by many of your comments, Hal. You talk to a capital raise to complete the restructure. I do like you to elaborate a little bit on that. But I’m really keen to hear, if I heard it correctly and please correct me, there was talk about sales leader…

[Hal Turner:]

Yes.

[Unidentified Analyst:]

…and new brands. Is a sales leader something that is dependent on the money raise and is several months off? Is it next year? Is it sooner? So can you just talk a little bit about the – to complete the restructure and the status of a new sales leader, please?

[Hal Turner:]

Yes, I will. I’ll address the new sales leader first, because it actually leads to the issue of completing the restructure in capital. One of the elements that we have faced is unwanted attrition. And that’s because of the pure accumulated working capital deficit and the issues that we’ve had to face with that. Therefore, it has certainly caused employees to have questions, as well as it has hampered my ability to attract world-class executives. World-class executives, and in particular, sales leaders that I have in mind have spoken to who are interested and who I believe will join the company. But these people are more than gainfully employed. These people are knocking the ball out of the park in their respective companies. And they see the vision. They see where we were going. They know that we’re on the right track, and they are very interested and want to join. But they’re not going to leave these literally six and seven-figure opportunities, where they are now relative to income and bonus and equity to come into a company who has not solidified and fully funded its business plan. So that leads us back to the capital raise. Let me just before I go directly to that say that, I believe based upon where we are now that we will be able to attract the additional talent in addition to the sales leader and sales talent operational leaders and technology leaders to join our current Pareteum. I believe we will be able to do that in the fourth quarter based upon our plans. Regarding the capital raise, I certainly not in a position to pre-announce anything. But clearly, the authorization of the shares gives us an equity tool that we did not have. And we are fast at work with our investment advisors to structure mechanisms to use those tools to bring equity capital into the business that is our number one goal at this point in time. So I hope I’m forthcoming enough for you within the reign of what I can say.

[Unidentified Analyst:]

Yes. Well, that’s very encouraging, I mean, Hal, if I may be very candid, my perception is that, you’re a wonderful experience man of very deliberately chosen works. And for you to say, if I heard it correctly that, you believe you will get a world-class sales leader executive by Q4, that’s – that certainly surpasses my expectation for this fiscal year. So I find that very encouraging.

[Hal Turner:]

So, George, let me give you just one other flavor comment. Yes, this – these sales leaders and business executives, they’re not just sales leaders. They just happen to be great sales people, but they’re business executives. They’re very well rounded business development sales operational executives each and every one of them. They were prepared to come in, in the first quarter of this year. When we thought we would sell ValidSoft, when we thought we would have the funds to do this. And they were committed. And I personally would not do that. I wouldn’t say come on in, when we didn’t sell ValidSoft, because we’re going to raise X or Y or Z, or our lenders are going to do W or Q or whatever, right, they couldn’t do that, because these are quality people. But they hung with us in terms of their interest in watching what we’re doing, and actually in some cases given this guidance and counsel. So I’m quite confident. The key trigger is the capital raise in the full funding of the business plan.

[Unidentified Analyst:]

Of course, very encouraging. If I may – and thank you for that, Hal.

[Hal Turner:]

You’re welcome.

[Unidentified Analyst:]

If I may, can you talk to ePlata if that’s the name of the customer. I think I heard in the call that we have secured a new customer, which means agreements to sign and execute it, ePlata, a U.S. company serving the Mexico market. Could you elaborate a little bit on the nature of that? How the economics look like? I’m not looking for numbers, I’m looking, what’s the structure of the deal? Does that – I explained that okay?

[Hal Turner:]

Yes, absolutely. And I’m going to yield to Pat who is not only the subject matter expert, but he personally droves the deal. Pat, if you would please?

[Pat Carroll:]

Yes. So thanks, Hal, and hi, George. Yes, so we’re excited about the ePlata contract, because basically it gets us into a space that we thought we were going to get into. Previously, if you recall, we had a lot of work with a company called Utiba. We took it quite late, and unfortunately they were acquired by Amdocs at the time. But this gets us firmly back into that space and there is a U.S. company, it’s well worth looking at their website and it’s spell EPLATA.com. But they go through the analysis of the under banked around the world, which is, it’s about two-thirds of the world population, absolutely not the addressable market. And what they do is, they provide multi-currency digital wallet payment ecosystem, which really looks at everything from voluntary payroll government and non-governmental income. And for that they charge in a variety of different ways, but it’s all kind of transactional user-based fees that are generated. We would be part of that structure. I think it would be a little bit premature to go through any numbers at this stage. But I do think that, as this unfolds over the next several weeks and months, and right now it’s going through the – if you like the pre-production roll out. So we’re in those – we’re in pre-production at this stage, but we’re looking to the broader roll out, but a very exciting market for us in Mexico because of the volume of individuals that fall into these categories and the potential for this type of deployment. It’s also a marketplace that’s extremely good from a ValidSoft perspective. We’ve got very strong relationship there historically, including with some of the biggest telecommunications families in that space as you know what I’m talking about. So basically – so that’s basically in a nutshell. It’s a terrific opportunity for us gets us back into that space with a huge amount of expertise and knowledge built up, and we’re looking forward to finally get a chance to deploy it.

[Hal Turner:]

Yes, I mean, ePlata is a very exciting company in terms of what they are trying to do and, I guess with partners that we’ve announced, so that’s...

[Gary Brandt:]

Yes, correct. And if you think about the nature of mobile money and mobile payments and you think about the ability to be able to use a voice by metric doesn’t mean up authentication. It becomes extremely powerful way for many individuals who may not even have the literacy aspects that one thinks off, but yet we’ll still have access to a smartphone. And don’t forget that our technology extends beyond the smartphone into the more traditional type handsets and to the older type cellphones as well. So we’ve got a value proposition that fits well into that space. And it’s very interesting that along side that we’re also working with authorities in the Asian market and more will come out in the next couple of months, a very similar type profile based out of Hong Kong and also with the same type of access to the Asian markets.

[Operator:]

We’ll now take question from Lee Alper with Hammock Investors.

[Lee Alper:]

Good afternoon. If I heard correctly, I think you said that in Brittan you now have a customer base with branches of about 17 million customers will balance off. Can you give some color on how that kind of customer base can convert to dollars?

[Hal Turner:]

Yes, Lee, thank you so much. And I’ll yield to Pat for his comments. I think what you’re going to hear is that it’s 17 million or so licenses. So Pat over to you.

[Pat Carroll:]

Yes, thanks, Hal. Okay, so basically, we’ve got our relationship through [indiscernible] company cycle and cycle provides our services directly into the banking sector in the UK. So we’re walking with cycle through their banks with our client. And the footprint of the two banks that we’re working with, in due terms deploy into our solutions is in excess of 17 million customers of those banks, so end users of the banks. And basically what we do are two types of security for the banks. One is, what we call SIM swap, which is where a monster [ph] can take over an individual’s phone, so that they can receive a one-time pin or password that send to that phone to allow a person to consummate a bank transaction online, that’s one type of thought. The other is where we apply it for what’s called proximity correlation, which is putting a phone into the same location as the users payment card. So that we know that we’re in the same space and therefore, we can tell that a transaction that’s occurring at a retail store, or an ATM or whatever is and adjacent to the transaction and that will cause our overseas type full prevention. So those are the two types and that’s what we’re doing in the marketplace. And as I said the number of end bank customers is in excess of 17 million right now.

[Operator:]

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

[Hal Turner:]

Thank you very much. I just have a few brief comments. I just want to summarize the importance of our stockholders having voted for the proxy items this morning. Those measures bring new vitality to our mission ahead. We are emerging now from a very difficult operating period. As George said, snatching victory from the jaws of defeat, where we had to instigate rightsizing on an immediate basis relative to the revenues that are being currently generated. It’s a testament to the underlying strength of the company and the employees and the belief in our technology, and our people that are senior lender has increased its investment, our largest customer who relies upon the Elephant Talk platform has reaffirmed its commitment and shared its growth plans with us. The time is now for our equity investors to embrace management’s vision to recognize the company’s strengths and to appreciate the vital role our senior lender has played in ensuring the persistence of our company. We now have and are actively seeking than we’ve thought and we’ve gotten shareholder support for all the proposals. We will tirelessly as we’ve already been doing work to execute on the mandate to complete the restructuring, grow the business, and fully fund this business plan and return value to all of our stakeholders. We’re looking forward to moving into this growth base in parallel with the conclusion of this restructuring program and the final shutting of the door on that. We’re demonstrating that the company’s full capability to provide relevant high-valued services in a rapidly expanding market is what the market wants. So, ladies and gentlemen, thank you for your time today. We very much appreciate your continued interest and support. And we look forward to bringing you more updates on the exciting plans of Pareteum. Thank you very much.

[Operator:]

This concludes today’s call. Thank you for your participation. You may now disconnect.