NEW YORK, NY / November 28, 2016 /
SeeThruEquity, a leading independent equity research and corporate
access firm focused on smallcap and microcap public companies,
today announced it has issued an update on FTE Networks, Inc.
(OTCQX:
FTNW).
The report is available here: FTNW
November Update Note.
Based in Naples, FL, FTE Networks Inc. (OTCQX:
FTNW, "FTE Networks") is a provider of network infrastructure
services and solutions. The company has nearly a decade of
experience providing end to end network infrastructure solutions
for Tier 1 and Tier 2 communications service providers, government
agencies, OEMs, and network infrastructure providers. FTE Networks
is focused on helping customers build smarter networks, which are
more capable of handling the increasing complexity and bandwidth
needs of services provided over wireless and wired data networks.
FTE is led by a seasoned leadership team with deep experience at
industry technology leaders such as Zayo, Level3, and Qwest, among
others.
Investment Highlights
On November 21, 2016, FTE Networks filed its 10-Q for 3Q16
results and provided an update with investors and stakeholders,
with highlights as follows:
- 3Q16 consolidated revenues were $3.8mn, versus $4.0mn in 3Q15.
Telecommunications revenue grew by 119% YoY as the company shifted
away from legacy staffing revenues.
- Core profit metrics improved as gross margins expanded to 37%
versus 14% in 3Q16 and FTE generated positive operating
margins.
- FTE issued bullish guidance for 2017, forecasting revenues of
$55mn, which would imply robust growth over our 2016 estimate of
$16.4mn.
3Q16 results provide glimpse into improving
profitability
The turnaround at FTE Networks has benefited from a transition
to recurring high margin telecom infrastructure contracts while
shedding low-margin staffing deals. With telecom revenues rising by
119% YoY and comprising all of the company's revenues in the
quarter, 3Q16 provided some insight into the core profitability at
FTE following the turnaround at the company. During the quarter,
gross margins more than doubled YoY to reach 37% from 14% in 3Q15.
FTE also generated positive operating profit of $0.03mn, or 0.7% of
revenue - a figure we expect to grow with scale. Indeed, 3Q16
results give us confidence that FTE will be able to meet or perhaps
exceed our estimates for 2017E, when FTE should benefit from
operating leverage, more recurring telecom revenues and improved
visibility from several large contracts.
Bullish guidance supported by large
pipeline
FTE followed several large recent contract announcements by
issuing bullish topline guidance for 2017. Management sees revenues
coming in at $55mn, which would imply powerful annual growth versus
our 2016 estimate of $16.4mn. Growth is anticipated to come from
managed network infrastructure services, and is supported by a
large pipeline. Indeed, FTE Networks last reported a three-year
pipeline of $166mn, and is in the process of launching an
innovative new Managed Network Services platform, which will carry
more attractive contract terms marked by recurring revenues and
high incremental margins.
Raising target to $1.50 on improving
profitability
We are raising our price target to $1.50 at this time. 3Q16
results demonstrated that FTE can generate operating profit, and
guidance issued by management was slightly above our estimates,
leaving us optimistic heading into year end.
About FTE Networks, Inc.
FTE Networks is on the leading edge of network transformation
helping communications service providers, government and enterprise
customers evolve their networks to meet advancing technology
requirements via network infrastructure, and edge computing
solutions to quickly enhance service innovation and deliver new
revenue streams. With a focus on smart design, open architectures
and consistent standards, along with expertise in building,
operating, and maintaining networks, FTE solves complex network and
system challenges that reduce costs and deployment time to
accelerate delivery and optimize performance of network
infrastructure. Operating five (5) industry segments; Data Center
Infrastructure, Fiber Optics, and Wireless Integration, Network
Engineering, Compute to the Edge, FTE Networks is headquartered in
Naples, Florida, with offices throughout the United States and
Europe. www.ftenet.com.
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SOURCE: SeeThruEquity