until then all comments are redundant. Getting old waiting.. Been here long time.
sad thing is it will be 10 years before he dies, appeals, blah blah, more tax payers dollars, he should he hanged or stoned to death.
Just allowing stock to be crushed, should be taking drastic action in getting company ready for sale, reduce head count, needs to cut costs, partnership, something needs to be done. Any serious thoughts on what management needs to do. Anyone?
What's InterCloud's Fair Value?
May. 15, 2015 2:43 PM ET | 1 comment | About: InterCloud Systems, Inc. (ICLD)
Disclosure: The author is long ICLD. (More...)
It seems apparent that InterCloud’s extremely high margin cloud segment revenue will be growing larger as a percentage of total revenue and gross profits in the quarters to come.
InterCloud's cloud segment with margins in excess of 80% made up $10 to $12m of ICLD’s backlog or between 28% and 33% of the total backlog.
InterCloud's product mix should remain gross margin friendly for several quarters to come.
Intercloud reported a significant improvement in gross margins to 35% in Q1 compared to 28% in the year ago period and 26% for all of 2014.
In terms of valuation I believe fair value for ICLD could be between $9.28 and $11.60 assuming 16x-20x my FY16 EPS estimate of $0.58 and a 35% gross margin.
I've been tracking shares of InterCloud Systems (NASDAQ:ICLD) for several months and it might be time to revisit this one as a possible long-term investment. I liked the investment thesis including the space the company operates in as well as its business model. My ongoing concerns were product gross margins and operating expenses. ICLD reported its Q1 results Wednesday and largely exceeded my expectations in terms of product gross margin and curbed my expectation of continuous increases in operating expenses for the foreseeable future.
I've spent over five years of my career in finance supporting an IT infrastructure healthcare provider. I can tell you first hand that companies are aggressively pursuing cost cutting measures to remain competitive. One way to cut costs is doing more with less, but typically this is not a sustainable business model long term. The other way to cut costs is to pay less for the same services. InterCloud is a company that falls into the latter. InterCloud's services allow companies to maintain an existing IT service level and reduce ongoing operating costs without a major capital investment.
My opinion of ICLD heading into the conference call could not have been more polar opposite from Aegis Capital's estimates. Aegis Capital is the only investment firm that covers ICLD and currently maintains a $7.00 price target along with a buy rating based on FY15 estimates of $116.5m revenue and EPS of $0.41.
I had expected ICLD to be unprofitable in 2015 driven by the company's inability to improve gross margins. However after updating my analysis InterCloud appears to be on a path to delivering a very profitable FY15 and FY16 at this point.
I came into Q1 expecting ICLD to report a significant non-GAAP loss for the quarter and lose 22 cents per share on roughly $20m of sales. For FY15 under my base case scenario I was modeling sales of $108m, operating expense of $41m, gross margins of 32% and an EPS loss of $0.40.
Instead of a decline in gross margins, Intercloud reported a significant improvement in gross margins to 35% in Q1 compared to 28% in the year ago period and 26% for all of 2014. Additionally, operating expense fell to just over $7m for the quarter and is expected to remain relatively flat over the remainder of 2015. The most important metric to determine ICLD's valuation is determining its ongoing gross margin profile.
The company did not provide any specific gross margin guidance, but it did provide some color underneath the company's record $36 million of backlog. According to ICLD's CFO Tim Larkin, the cloud segment with 82% gross margins made up $10 to $12m of ICLD's backlog or between 28% and 33% of the total backlog.
It's not clear what total percentage of sales the cloud segment will represent in future periods, but it seems apparent that InterCloud's cloud segment revenue will be growing larger as a percentage of total revenue and gross profits in quarters to come. I expect InterCloud's overall gross margins to continue to be buoyed by its cloud segment (VaultLogix) that delivered 82% gross margins and contributed 13% of total sales in the first quarter of 2015. Leading up to the acquisition of VaultLogix in October 2014, the company reported $12m of revenue including a 98% recurring revenue stream and an 80% gross margin. It seems safe to assume that InterCloud's cloud segment will report revenue in excess of $12m in 2015, which will certainly help keep gross margins at or above 35%.
For my base case analysis I have increased my base case to 35% gross margin, dropped my operating expense estimate to $30.4m and maintained my 2015 revenue estimate of $108m. As a result my EPS estimate has gone from a loss of $0.40 per share to a gain of $0.38 assuming 17.2 million shares outstanding.
Looking out into 2016, I have maintained my gross margin level at 35% and have modeled revenue growing at 25% to $135m in FY16 down from 42% growth in FY15. Additionally, I have modeled a modest increase in operating expense of just under 15% from $30.4m to $34.8m, which results in an FY16 EPS estimate of $0.58.
and I suspect shorts will try to keep it down, apparently that spike yesterday was the leak on news
expect another 20 plus million share traded. with a small float, shorts have absolute no where to hide. LOL
shorts trying to write BS on company. Games being played. Stock should be over 5 by now. Watch stiops boys, and keep track of option contracts.
just read article. should be interesting
Coal may be slowing in US but globally still being greatly utilized, Germany, France, China, and others still building coal fired plants, Crazy times.
all about invalid patents. 6 to 2 ruling, Scalia mentioned patent trolls. Interesting, tried to copy and paste but yahoo not allowing me to post
trying to flush out weak hands and tight stops, smart money taking advantage of the weakness.
so looks good.
was not that bad, pounding unwarrented
No serious coverage, BS volume, just not taken seriously. Tell me I'm wrong, just what I get out of this terrible performance this lst quarter. Management needs to get out more and help explain what co. is doing to calm shareholders.
forget this noise, shorts are doing there best to put fear into weak hands and short term traders. Watch over next week or so. will be back. GLTA
pounding week after week. Maybe we get good news, or that shorts already know something??