InterCloud Systems, Inc has a Unique Opportunity

Zacks Small Cap Research

By Ken Nagy, CFA

InterCloud Systems, Inc. (OTC BB:ICLD) is a global single source provider of value added services for both corporate enterprises and service providers The firm is made up of four operating subsidiaries and two pending acquisitions that will likely mold the firm into a significant player in both cloud and managed services as well as telecom infrastructure with revenues north of $85 million. The growth of the cloud and the outsourcing of services by telecom providers will act as a tail wind for the firm. Their unique combination of services sets them apart from competition. While we like growth story, investors should be aware that the firm faces the twin tasks of bringing the six firms together under one company and the prospect of an offering will add dilution to the shares.

The new firm will act as an end-to-end solution provider of cloud and managed service based platforms, professional services, applications and infrastructure to both the telecommunications industry and corporate enterprises. It will operate three divisions.  

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  • Cloud and Managed Services.  InterCloud’s  services offerings include platform as a service (PaaS), infrastructure as a service (IaaS), database as a service (DbaaS), and software as a service (SaaS). The Company’s experience in system integration and solutions centric services helps its customers to quickly migrate and adopt cloud based services. Managed services offerings include network management, 24x7x365 monitoring, security monitoring, storage and backup services. Cloud-based and managed services, which include both hardware solutions and professional services, enable corporate enterprises to integrate their applications and migrate various services into a web-hosted environment, as well as extend the ability of telecommunications and broadband service providers to provide cloud-based services.

 

  • Applications and Infrastructure.  InterCloud provides an array of applications and services, including unified communications, interactive voice response (IVR) and SIP based  call centers. , as well as structured cabling and other field installations throughout North America and internationally.  The Company will design, enginons completed during the quarter.

    Similarly, cash used for operating cash activities during the quarter was $1.6 million, which included payments for professional service fees and other acquisition related costs associated with the two acquisitions that closed during the quarter.

    Still, the Company ended 2012 with renewed revenue growth and tremendous progress on its recent transformation into a provider of comprehensive SecaaS offerings, which was accelerated by its strategic acquisitions and the formal launch of its new cloud-based email Security-as-a-Service offering in early 2013 highlights the Company’s execution on its strategic roadmap and its foundation for future growth.

    Commtouch's new Email Security-as-a-Service solution marks a major launch of the Company's latest cloud-based offerings and is complemented by new solutions focused on Email Security On-Premise for Service Providers and Mobile Security Services for Android.

    The three recently launched solutions have generated pronounced initial customer interest setting the stage for strong revenue growth in 2013.

    Likewise, management anticipates that organic new bookings growth, combined with the synergies of its recent strategic acquisitions, helps puts Commtouch on track to realize double digit year over year full year 2013 revenue growth. 

    Along the same lines, management anticipates revenues for the full year 2013 revenue to be in the range of $34.0 million and $35.0 million, which would be a year over year increase of approximately 42 percent to 46 percent when compared with fiscal 2012.

    Similarly, full year 2013 GAAP net income is expected to be greater than $2.0 million while non-GAAP net income is anticipated to be greater than $3.5 million.

    Still, both GAAP and non-GAAP net income guidance includes a higher level of sales and marketing expense versus 2012 to support a strengthened global sales platform.

    Likewise, management plans to continue to strategically invest in the build-out of its global sales and marketing efforts.

    It should be noted that during the first half of 2013, the company also expects to recognize extraordinary expenses related to its previously announced acquisitions, as well as related integration and streamlining expenses, totaling approximately $0.8 million, the majority of which will be recognized in the first quarter of 2013. The impact of these charges is reflected in the aforementioned full year 2013 GAAP net income guidance. The company expects the impact of integration and streamlining activities to positively impact the financial performance of the business during the second half of 2013.

    Finally, In May 2012, Commtouch announced the authorized initiation of a stock repurchase program of the Company's ordinary shares in the open market, in an amount in cash of up to $2.5 million.

    The action reflects the confidence of the management team and the board of directors in the long term growth prospects of the Company.

    During the quarter ended December 31, 2012, the Company had repurchased 105,000 shares at an aggregate cost of approximately $300,000.

    Likewise, as of December 31, 2012, approximately 767,000 shares have been repurchased through the program at an aggregate cost of approximately $1.7 million.

 

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