What’s going on with FTE Networks Inc. (NYSEAMERICAN: FTNW)? After delivering impressive quarterly results for the period ended September 30, 2017, the market participants received astonishing returns. From trading below $6 on October 30, 2017, the stock touched the $24 mark in 2018 before retracing back to the $17 candle. Have a look at the price action below:
With that fantastic quarterly report, in January 2018, the company also commenced to trade in the NYSE and excited the market after signing several multimillion dollar contracts with third parties. Since we believe that our subscribers would appreciate this growth story, we executed due diligence on this name.
FTE Networks, Inc. was founded in 2010 and is headquartered in Naples, Florida. FTNW is a leading provider of innovation technology. It enables adaptive and efficient smart network connectivity platforms, infrastructure, and buildings. FTE provides end-to-end design, build, and support solutions for state-of-the-art networks, data centers, residential and commercial properties.
In our opinion, the most interesting on this name are its clients. FTE Networks, Inc. is meant to be working for Fortune 100/500 companies, including some of the world’s leading Telecommunications and IT Services Providers as well as REITs and Media Providers.
Revenues picked up in 2017
Undoubtedly, the most interesting on this ticker was the impressive sales increase in the last part of 2017. From delivering $5.08 million in March, sales picked up to $50.69 million, and $79.08 million in the last two quarterly reports released. With those numbers in mind, the company was also able to deliver positive gross profit of $8.32 million and $15.53 million in June and September respectively. The positive reaction of the market makes sense given that the company was losing money in December 2016. Check the following table:
|Cost of Revenue||63,553||42,376.598||2,678.402||3,199.254|
How were these positive revenues explained? Michael Palleschi, FTE Networks’ Chief Executive Officer, said the following about the results:
“Our initial six months as a consolidated operation have produced strong results, including our highest quarter of revenue generation since inception, which underscores our confidence in the business as we enter 2018. During the fourth quarter, we successfully launched our CrossLayer technology platform as a foundational service offering to our Benchmark Builders client base, which drove a record backlog of $434 million at year-end, which includes several Master Services Agreements.” Source
There is something else. In 2017, FTE acquired Benchmark Builders, a tier one firm in the coveted New York City market, which enhanced our top-and-bottom lines and created an ideal sales channel for our first to market compute-to-the-edge technology powered by CrossLayer. The increase in revenues is the result of consolidating the income statements of both companies.
The new contracts
Revenue momentum seemed to continue in February 2018, as FTNW was awarded new technology and infrastructure contracts valued at approximately $45 Million. The new customers are a global trade book publishing company, and a leading Fortune 100 global technology. For those making calculations regarding cash flow payments and net income generation, please note that work is anticipated to begin shortly and is anticipated to be completed over a period of approximately 18 months.
Also in February 2018, the company announced two new projects totaling $27.5 Million. The clients were again remarkable; a $100+ Billion multinational technology company with 75,000 employees globally, and a leading television broadcasting company with revenues of approximately $28.5 Billion. Please note that work will commence in Q1 and is expected to be completed over the next 18 months.
Finally, on March 1, 2018, the company also noted that its subsidiary CrossLayer, Inc. had also signed a a three-year, monthly recurring revenue contract with an entertainment production company supporting multi-billion-dollar media outlets.
The management was obviously very positive about growth exhibited:
“I am extremely pleased with our steady flow of contract awards and the strengthening of our customer portfolio from both our existing customer base and new customer contracts. The continued expansion of FTE’s project portfolio with esteemed companies signals the market’s growing enthusiasm for FTE. Our visionary combination of technology and infrastructure supports the increasing demand for intelligent buildings by offering a comprehensive set of innovative solutions. ” Michael Palleschi, President and CEO of FTE Networks said.
What’s our take? – Conclusion
While FTNW may be trying to heat the market releasing news exactly when the stock trades on NYSE, the new contracts show that the company is really growing at a high pace. If the level of growth is maintained in 2018, we could expect very interesting moves in the stock charts.
With a market cap of $99 million, a book value per share equal to $3.05 and EV/EBITDA ratio of 24x, the market seems to believe that growth will continue for some time. We agree with this thesis.
To sum up, stay tuned to this name. It may surprise in 2018.
For the next ride, please stay tuned, and insert your email above!
Disclosure: We have no positions in any stocks mentioned, and have no plans to initiate any positions within the next 72 hours (disclaimer).