Yesterday Apivio (TSX:APV.V) reported revenues and earnings above analyst expectations again evidencing that the current bid for the company by Nuri Telecom of C$0.40 may be too low and others may find bidding for the company attractive.
In Q4 2016 the company reported revenues of C$16.8 million, up 3% from a year ago and versus analyst estimates of $14.5 million. More importantly, adjusted EBITDA for the quarter was C$991,106 versus C$630,054 in Q4 2015, increasing by 57%. Net Income was also a record at $722,317 compared to $337,189 in Q4 2015. Earnings per share were C$0.01, flat with Q4 2015 due to rounding. The earnings improvement was due to higher gross margins and flattish operating expenses. There was exceptionally strong demand in South Korea where one customer in particular doubled down on promotional activity in the quarter.
The year ended up with slightly down revenues year over year at C$58.1 versus $60.0. The year results were dragged down by slower sales in Q2 and Q3 in particular. Also contributing to slower sales were delays in new product launches. The L2 was launched in December rather than earlier in the year and the CLive cloud-based service was launched in 2017 rather than 2016.
For the year:
- The company sold $48.9 m VOIP phones in 2016 versus $49.4 million in 2015.
- Sales of Wi-Fi phones were C$2.9 million in 2016 down from C$4.2 million in 2015 mainly due to a decrease in orders from a major South Korean customer.
- Media phones (high end VOIP and Android desk phones) were $5.15m versus $5.09m in 2015 primarily due to an increase in demand for high-end IP700 phones in South Korea.
- There was $550,000 generated from the sale of 2,000 units of the new UT880 in Q4.
Despite lower sales and marketing expense, adjusted EBITDA for the year was C$1.98 million in 2016 versus C$2.12 million a year ago. Net income (including an extraordinary expense of $50,000 for the Nuri bid) was $880,000 versus $932,000 in 2015. EPS for the year was $0.02 flat with a year ago on 4% more shares.
The balance sheet improved and ended the year with cash of C$7.8 million and debt at $6.1 million. Working capital was $6.7 million.
The company is now trading at an enterprise value of C$21.8 million or 0.3Xs the C$66 million in estimated 2017 revenues, far below industry averages.
Looking to 2017
The main issue for the company right now is still the bid from Nuri of C$0.40. Haywood Securities is working to find alternative transactions and a number of other parties are now looking at Apivio. Apivio and Haywood both believe that C$1 is much closer to the true value for the company. The deadline for accepting the offer is 11:59 PM (Toronto time) on May 2, 2017.
The base business remains steady and the company has much to look forward to in 2017.
- Three of the company’s phones are now Broadsoft certified, one in the Dexter VoIP phone series, one in the Wi-Fi series and one in Android series phones. These are all the models that are only sold in North America. They can be sold into a network of 80 countries with a combined 15 million UC hosted lines.
- The new L2 Wi-Fi has gotten favorable feedback from the telecom community and is now even available at Amazon. The company has signed two resellers for this product and is talking to several more.
- It just introduced its new cloud based turnkey system called CLive. It signed Sora Telecom as its first customer and Sora will very shortly be launching a service that includes with the Monet UT880S Android desk phone, the Liberty L2 Wi-Fi phone, and Dexter IP336 desk phone. Apivio expects to be paid recurring revenues of C$0.75 to C$2.00 per month for this service.
- A new IoT DEC phone is expected to be introduced in Korea in the second half of the year.
With these new products and services and a stable base Korean business, we expect considerable potential upside for 2017 after years of R&D investment. Hopefully these prospects will lead to a more favorable outcome for investors than the low bid of C$0.40 from Nuri.EndFragment
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