Buy Pareteum Corp (NYSEAMERICAN: TEUM) Despite the Blockchain Pop


Pareteum Corp (NYSEAMERICAN: TEUM), a provider of mobile networking software and services, chiefly to Mobile Virtual Network Operators (MVNOs), is the latest to join the list of companies adding a blockchain or cryptocurrency strategy to their business activities.

The company said Tuesday that it had completed development enabling it to add support of blockchain technology to its billing and settlement services. This means the company’s customers on its Global Mobility Cloud are now able to accept payments via cryptocurrencies such as Bitcoin, Ethereum, Litecoin, Airtokens and others. Not only that, TEUM’s customers will also be able to process payments and perform settlements with their partners in any such currency.

Predictably, the new blockchain and cryptocurrency angle triggered a sharp surge in the company’s stock, which closed Tuesday at $2.80, up $1.53 or 120.47%, after a brief trading halt.

Pareteum Corp (NYSEAMERICAN: TEUM)’s New Technology

The company is a provider of Software as a Service (SaaS) to communications service providers including network telecom carriers both wired and wireless, enterprises and businesses, and the Internet of Things, i.e., all connected things and devices. Its turnkey cloud platform provides quick deployment of solutions to the aforesaid categories of customers.

TEUM converted to the SaaS business model in 2016.

TEUM’s major customers include Vodafone, Zain, Lebara and Lowi.

The company has identified that mobile phones are being increasingly used as repositories of digital wallets and these need to have the ability to handle all forms of currencies, including digital and crypto. As a result, there is a growing population of apps that can facilitate digital settlements.

“In thinking about this scenario, where essentially your mobile phone is your bank, without bricks and mortar, it’s possible that throughout the day you may have earned enough digital currency through your transactions to be rewarded with that coffee or snack or phone minute or that extra megabyte of data,” said Hal Turner, Executive Chairman and Principal Executive Officer of Pareteum. “We envision a time in the not too distant future when Pareteum could create its own currency payments and settlements among the millions of subscribers on its platform globally.”

Though the new blockchain angle is welcome, the company has not exactly been sitting on its laurels with respect to its core business. It has scored a significant string of contractual wins in recent months.

Pareteum Corp (NYSEAMERICAN: TEUM)’s Revenue Milestones

The company currently has a 36-month contractual revenue backlog of $129 million. Contract wins in December, worth $13 million, include:

Date Value Type Customer
December 20, 2017 $4 M Global Internet of Things (IoT) contract for cloud services European global provider of IoT security to network providers and Electronic Sims embedded directly in IoT devices
November 28, 2017 $1 M Communications platform as a service (cpaas) to a mobile virtual network operator (MVNO) MVNO focused on cross-border mobile service in China and North America.
December 5, 2017 $8 M Platform to manage multi-million dollar economic development investment in a Smart City A leading Eastern European telecommunications company and major Eastern European capital city.



Pareteum Corp (NYSEAMERICAN: TEUM)’s Business Transformation

TEUM was in a crisis in 2015 after the loss of lusacell as a customer in 2015. Since that time the company restructured its business, software and platform as a ‘Software-as-a-Service’ (SaaS) model and reduced headcount and costs in alignment with its revenues.

“Our restructuring and repositioning in 2016 has led to solid growth in 2017, and has defined our innovation in both services and market positioning, establishing a strong outlook for our success in 2018 and beyond,” said Turner in an update for shareholders earlier this month.

Its customer base increased from 4 as of year-end 2016 to currently 21 customers. Revenue per employee increased to $222,139 in the third quarter of 2017, a 4-fold increase from the end of 2015 when this metric started being monitored.

The initiatives helped TEUM raise new capital of about $20 million, enabling it to execute certain long-term strategies that will help secure scale and dominance in its area of operations. The raisings improved cash flow and capital to enable operating break-even, as well as dry powder for acquisition opportunities. It also enabled the company to set right its New York Stock Exchange listing deficiency.

Last week, TEUM prepaid $8.1 million of Senior Secured Debt to lenders Atalaya Capital Management and Corbin Capital. The loan would have matured on December 31, 2018. “This debt financing package, originally implemented by the Company’s former management, was no longer optimized for the exciting value-generating and growth stage of our business plans,” said Turner in a statement.

Clearly, exciting changes have happened at TEUM, even before its Tuesday blockchain announcement.

Pareteum Corp (NYSEAMERICAN: TEUM) Is A Buy

Leave aside, therefore, the blockchain-induced pop in the company’s shares. The company’s recent and sharp bounce in the order pipeline generates confidence in its business direction and model.

“Customers have seen the value that our cloud based platform can unlock for them and they’re signing on in record numbers,” said Turner on the Q3 earnings call. “These customers span geographies including the U.S., Latin America, Africa, India, Europe and the Middle East.”

In sum, TEUM is an attractive combination of the virtues of cost control, debt reduction, rapid growth and adequate capitalisation.

Investors should invest in TEUM on declines.