InterCloud Systems' (ICLD) CEO Mark Munro on Q4 2015 Results - Earnings Call Transcript

| About: InterCloud Systems, (ICLD)

InterCloud Systems Inc. (NASDAQ:ICLD)

Q4 2015 Earnings Conference Call

April 7, 2016 10:00 am ET

Executives

Tim Larkin - CFO

Mark Munro - Chairman, CEO

Analysts

Andrew Nowinski - Piper Jaffray

Operator

Good day and welcome to the InterCloud Systems Incorporated Fourth Quarter and Fiscal 2015 Earnings Call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Tim Larkin, Chief Financial Officer. Please go ahead sir.

Tim Larkin

Thank you. Thank you for joining us for InterCloud Systems full year 2015 earnings conference call. I'm here with our Chairman and CEO, Mark Munro.

Before we get underway, I'd like to ask everyone to take note of the Safe Harbor paragraph that appears at the end of this morning's news release. Paragraph states that any forward-looking statements that we may make, speak only as of the date made and are subject to inherent risks and uncertainties including those described in the company's most recently filed reports with the SEC.

Except as otherwise required by Federal Securities Law, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statements contained herein, or elsewhere to reflect any change in our expectations with regard to any changes in events, conditions or circumstances on which any such statement is based.

And now, I'd like to introduce InterCloud's Chairman and CEO, Mark Munro. Mark?

Mark Munro

Thank you, Tim. Good morning everyone. I'm Mark Munro, Chairman and CEO of InterCloud. Welcome to InterCloud's fourth quarter and annual 2015 financial and operating results conference call.

Before, I turn the call back over to Tim Larkin, our CFO to review the financial results for the full year of 2015, I would take some time to discuss the state of the IT market as it relates to software defined networking and network function virtualization as these are key drivers to our new cloud solutions and services offerings.

In addition, I will discuss some of the significant events during 2015, as well as subsequent events of importance. I want to thank the shareholders for believing in us and I especially want to thank all of our hardworking and committed employees, who without we would not even be here.

I'm excited as ever about our business model, our growth prospects and our future plans. We booked over $87 million in adjusted revenue in 2015 and did so with some of the world's largest companies like AT&T, Verizon, Ericsson, Comcast, New York Times, ACE Insurance, Panasonic and hundreds more of this size and scale.

Only a few years ago in 2011, we booked only $2.8 million and now over $87 million in adjusted revenue in 2015. And we were chosen as one of Deloitte's Technology Fast 500 during 2015.

One important note here is that, of the $87 million in adjusted revenue for 2015, approximately $9.9 million of that was generated by VaultLogix data storage revenue. We sold our data storage assets in February 2016, and therefore, this revenue will officially not be recognized in our 2015 results. And this is why you will hear me use the words adjusted revenue for the description of the $87 million in 2015. I just wanted to eliminate that as any confusion for anybody out there today.

I think one of the difficulties in the small caps space today is short-term expectations of investors. I totally understand it. But, I think it's important to understand that InterCloud has built the strong revenue stream with traditional IT managed services. And at the same time, we've been spending dollars to build out a unique and potentially very valuable Software Defined Networking and Network Function Virtualization cloud portfolio services. Typically, this sort of development effort is funded privately with no public exposure at all.

We choose to combine the start-up products with our existing revenue in customer base as we saw the value of having clients where our sales and engineering teams had long-term relationships already in place. As I look back, we have added pressure to our endeavor as we have investors watching us burning cash for the past few years, even though we have a solid growing traditional IT services company.

I believe this has caused some confusion, but we have also managed to build out our product portfolio over the past three years that is now starting to reap benefits and will continue to grow over the next few years.

We have done all this on approximately 1/10th of the budget that many technology startups spend. But, we did it in the public eye. My point is that we have come so far over the past few years and in the past two months and even in the past few weeks, we have seen the beginning of the tide changing. We booked a [new PO] [ph] is around SDN and NFV over $1 million of annualized revenue at excellent margins in the past 60 days. This was non-existent one year ago.

We have insight into much more revenue around the SDN and NFV practices we have built. And we have the possibility for this to scale very quickly now. We are more than excited and with very lofty goals for this trend to continue through Q2 and throughout the next few years as this market is finally catching fire.

Our long-term investors have been patient, while we have never wavered in our commitment to this space and we appreciate it. Our team is fully committed to our success and fully invested as well for the long-term.

In 2015, InterCloud reached record high revenues, solid gross margins, integration savings and synergies, cross-selling of services across our footprint and launched several industry leading new cloud services and solutions.

In addition to all these milestones, we have continued to grow our development team and our senior management team. I want to take a few minutes now and introduce two recent senior management additions. What makes this important is that we continue to attract very successful industry personnel to assist InterCloud in becoming a market leading brand in SDN and NFV.

The first, Nigel Williams has joined us as COO of cloud and is responsible for the growth and success in our transformational business. Nigel joins us with sales and marketing experience from Cisco, Ciena and Level 3 Communications. Nigel is focused on the delivery of our SDN and NFV Orchestration solution, delivery of advanced services into the carrier community and the development in refinement of our go-to-market strategy.

The second, [Ian Harris] [ph], joined as CTO to drive success and growth in our transformational business. And is tasked with defining and delivering technologies and products that will underpin InterCloud's SDN and NFV and MANO, which stands for Management and Orchestration service. Ian has more than 30 years experience with Ciena, Nortel, STC and BNR. His career is focused on delivering critical service provider and enterprise solutions with more than 20 years experience delivering mission critical software. We thank them both for joining our team, we look forward to a successful 2016.

Our team is full of incredible talent and these two new executives will certainly add to that and to our growth and success in 2016. Our success will undoubtedly be driven by our people and we will continue to strengthen our organization as the industry transitions to SDN and NFV.

In 2015, InterCloud announced they had received unsolicited indications of interest in some of our business units. This led to the sale of our data storage assets for $24 million in cash. The significance of this event is the increase in our cash position which has somewhat plagued the company over the past several years.

Our focus over the past several years has been to built out a competitive portfolio of cloud solutions and services, with a focus around hyper converge private cloud with a particular focus around Software Defined Networking and NFV or virtual -- fully virtualized network functions, in addition to virtualized compute and storage.

InterCloud has been using cash annually in order to build out this portfolio of services which has negatively affected cash flow provided from our traditional business units offering IT managed services, WiFi, DAS and other voice data and optical solutions in the enterprise and service provider markets.

The combination of this sale of assets is a significant change in our cash position, which will allow InterCloud to move forward with our plans in our SDN and NFV strategy. Our belief is that this strategy has the greatest potential value creation over the next several years for our shareholders.

I'm going to now read some quotes from an SDN and NFV industry analyst that have deep knowledge and credibility in our space, SDxCentral out of Sunnyvale, California. And I will then, come back to it and talk about its relevance.

The Software Defined Networking market is expected to surpass $35 billion in the next five years far higher than previously reported almost by an order of magnitude. Adoption of SDN technology has accelerated in recent years from sales of $10 million in 2007 to $252 million last year.

Companies are turning to new software centric approaches to control their computer networks as they move beyond traditional network infrastructure wasn't designed for today's cloud computing. The emergence of the Software Defined Networking market is supported by the growth and venture capital investment in SDN focused companies, venture capital funding of SDN-related companies rose from $10 million in 2007 to over $450 million in 2012. Now, they point to the specificity of the customers.

Customer buying behaviors are changing today. Specifically, we see customers requiring that network gear purchased today be SDN compatible or upgradable. True this contributes to SDN washing through our experience working with real customers with real budgets as they are demanding incredible SDN roadmaps today. This means that the business impact of SDN is being felt in today's purchase decisions long before companies truly -- true SDN products are deployed or shipped.

Now, into market segments, SDN is going to impact every customer segment and used case of the networking market, meaning no customer or vendor is going to be immune to SDN driven change.

For customers this means, you need to start investigating how and where you will leverage SDN for vendors; your advance customers are already expecting a roadmap to SDN and you must make sure you have a clear story and a clear plan.

Now, the next segment is about hardware, there is going to be a ton of hardware in a software defined networking world. We will still need PKMs, data path forwarding et cetera and high performance in scale meaning SDN is not the -- the complete depth of networking hardware and nor does it mean we will all use commodity switches.

Conversely based on our experience with the new used cases for cloud and mobile infrastructure, we see SDN driving need for new approaches to networking hardware, ironically, we see that incumbents will lead to either build new types of hardware to address the number of SDN used cases or acquire another company to gain the relevant parts and capabilities to differentiate in an SDN world.

I realize there is a lot of technology acronyms et cetera, but I think overall -- what everything is pointing to is that every used case in every aspect of networking is going to be affected by NSD and therefore NFV.

This is an excellent analyst firm for our shareholders to follow in order to learn more about the segments of the SDN and NFV markets that InterCloud is focused on. I think this is going to be a big help to better educate yourselves.

This short article speaks to the expanded growth prospects in the market from just a few years ago when predictions were much lower. And this is because we can see how, see the approach AT&T has taken with Domain 2.0 and how more service providers are following in their footsteps enrolling our plans for SDN and NFV now. We are witnessing it in more scale recently than we ever have in the past.

InterCloud has been focused on specific SDN used cases and we understand that the SDN environment will still have some hardware aspects of it and I will touch briefly on three of our used cases where we see near term revenue opportunities. We clearly have other used cases but for today's call, I'm going to try to keep it as simple as possible and just discuss three of them.

The first one is our independent multi-vendor VNF which is a virtual network function validation. In virtual network function for those that haven't heard it before is a virtual router or a virtual firewall as an example. We offer a service provider a process by which they can validate any virtual network function built by any company. So any virtual firewall any virtual router from anyone we can test it, validate it, certify how it works in given environments and on specific platforms. This gives the service provider or carrier an independent certification process.

Our customers are telling us they want this because they don't trust the OEM vendors or the manufacturers of those virtual network functions that make the virtual networking products to fairly expose weaknesses or issues with their VNFs versus other VNFs. Remember big service providers will have 100s of different vendors in their network and need them all to be validated and certified by an independent partner that's InterCloud.

In addition to basic VNF validation, our team is working on expanding complex validation services to help service providers and others deploying SDN and NFV, they have faster time to deploy these new networks by eliminating problem VNFs improving which VNFs can work in a multi-vendor robust and scale environment and do it efficiently.

Number two, I'm going to focus on other used case which is route reflectors used by service providers. Route reflector is one of the first networking functions that service providers are looking to virtualize. InterCloud has developed a used case for this application for service providers to help them virtualize their route reflectors immediately. This has been tested in our lab environment and now we are pushing this into production using our DPoD private cloud platform as the host for multiple virtual route reflectors and speed up deployments for the SPs.

This will help the customer cut cost have scalability and agility without needing physical route reflectors to perform this function. In addition, the DPoD will allow the customer to move on to additional used cases for deploying other virtual network functions in our data centers and network footprint. It gives them all a chance to learn more about SDN and NFV and train their network teams without a forklift upgrade approach.

The third, a layer three VPN we call it, this is MSO platform offering a competing product to MPLS. If a service provider does not have an extensive or expensive MPLS core network they cannot offer MPLS services anywhere in the network.

Our layer three VPN product uses software defined network overlaid networking to produce a managed service similar to MPLS, but at a fraction of the cost of the SP and therefore, the end user customer.

InterCloud users are NFV grid software to allow the SP to ship a server to the customer and once it's plugged in into the Internet connection, it automatically pushes out to the server, the pre-configured virtual network functions. This is all managed by NFV grid InterCloud software. These are just a few of the used cases. I'm trying to keep this as simple as possible, it's difficult as this new software based networking can be complex and difficult to describe compared to just buying individual hardware boxes and wiring them up in the back of a rack in a datacenter.

The software defined networking and network function virtualization functionality subscribed in these three used cases truly does revolutionize time to market or service providers and enterprise customers.

Now, I spend a great deal of time and our commitment to SDN and NFV cloud portfolio. But, we have a very solid and growing business and base of customers utilizing traditional IT services we offer in addition to our cloud practice. It's important to note that this customer base is producing a bulk of our adjusted $87 million in revenue from 2015. We have a solid pipeline of sales that has remained very high in excess of $100 million now for some time.

We have strong indicators that wireless network engineering will continue to see growth as carriers continue to rebuild backhaul networks and deploy new Small Cell technology.

Our service provider staffing business is consistent and has growth prospects for 2016 as we have expanded its core capabilities to include building invasive qualified SDN and Openstack certified engineers for the upcoming boom in deployments.

Our enterprise managed services and reseller practice grew in 2015 and we have strong prospects in 2016 as WiFi and security are growth drivers in addition to migrating to our DPoD private cloud platforms for the enterprise.

We have positioned this company to move to profitability with both traditional IT services and with a high growth opportunity we have positioned ourselves in SDN and NFV.

Lastly, we have greater liquidity at InterCloud than we have ever had in the past. We are moving forward with our plans to grow this technology services company and create value for our shareholders. We predicted this industry move to SDN and NFV over three years ago. And we also predicted some of the complexities that would allow a smaller independent SDN and NFV technology partner like InterCloud to create value in the space.

We have executed up to this point and we are very well positioned to continue to execute and now garner greater revenue streams.

Thank you. I will now turn the call over to Tim Larkin, our CFO. And then, after Tim is finished, I will take a few minutes to touch on a few highlights then we will move to Q&A. Thank you.

Tim Larkin

Thanks Mark.

I would like to talk briefly about revenue and gross profit. Revenue for the full year 2015 increased by $3.9 million or 5% to $77.7 million. This increase does not include the revenue of $9.9 million from our data storage business, which was sold in the February of 2016. This compared to $73.8 million for 2014. This increase resulted from an increase in our managed services segment.

Our gross profit percentage was 25% for 2015 compared to 24% for 2014. The overall increases in gross profit percentage was due to an increase in the managed services segment. This was offset by decrease in the gross profit from a professional services and application and infrastructure segments.

Thank you. And I will now turn the call back to Mark Munro. Mark?

Mark Munro

Thanks Tim.

I'm now going to just take a minute or two and just cover a few major highlights and bullet points. One, I just want to reiterate that the SDN and NFV market is finally maturing and we are actually producing revenue from it now unlike a year ago or even six months ago.

Our products have matured and then further defined as I mentioned in three of our used cases. And in all of these used cases add tremendous incredible value to our customer base and we know that because they tell us that.

We clearly have industry veteran team with past successes in the networking market segment. And obviously, it's critical because the success of any company is always defined by its people. And we really, truly attracted some of the best.

Another area to cover is, we've been working very diligently over the past six months on building strategic partnerships that will help us grow and develop in broad not go to market strategy. And we're continuing to do so and I think you'll hear more about that in the near term and in the future.

Obviously, another point is that we believe we are well positioned in the SDN, NFV market. We're ahead of the curve with a very solid product and service portfolio and we believe we will continue to see accelerated consolidation in this market segment during 2016 and again in 2017 as everybody -- everyone of your large players is beginning to realize the complexities behind delivering software defined networking services and virtual network functions in a package in a fully working environment and its difficult they need a lot more integration capabilities and they need broader skill sets around software within your team and that's a bit different than it has been in the past and we clearly have built an entire organization with those skill sets.

And lastly -- last couple of things I want to point you, again, is just that because I know it's literally -- I was asked this question almost every quarter in the last three years is, what's your cash position? And clearly right now, we have plenty of cash on capital on hand to execute on our growth plans. Before I move to Q&A I think some of the exciting things I've mentioned around recent POs and orders and gaining and actually making some sales around SDN and NFV very recently. I thought it would be a good time just to mention a few of the people that have been with this company for three to four years and in the trenches and without that insight envision we wouldn't be able to hire new people and grow this business and go where we're going and I'm just going to take a minute to say who those are.

I'd like to thank Aqeel Asim, [Alif Ayazi] [ph], Dan Sullivan on the accounting side have been here since the beginning and several others. But Frank Jadevaia, myself, we had this vision three or four years ago, we stuck with it and everybody has contributed and we build a great portfolio products but anyway I just want to take a moment to publicly thank them because we don't always get a chance to do that.

So at this point I'd like to turn the call over to Q&A.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] We'll take our first question from Andrew Nowinski with Piper Jaffray.

Andrew Nowinski

Hey, good morning guys, congrats on the nice quarter.

Tim Larkin

Thanks Andrew.

Mark Munro

Hey Andrew, how are you?

Andrew Nowinski

Pretty well. Just wanted to ask question, I think I have several here I guess. Last quarter you had a number of multi-year large contracts, I think one was with AT&T, I was wondering can you give us any color in terms of what they're deploying, are they deploying DPoD SDN solution? And then has that AT&T deal triggered interest from other large carriers as well?

Mark Munro

The contracts that you're talking about from the last summer were not part of DPoD or SDN. They were more on your traditional IT and carrier services rollouts. So no, it wasn't part of -- that one wasn't part of DPoD or SDN, NFV in particular. But, what I will say is, what has happened is AT&T has been obviously, you know one of the first drivers of SDN and NFV into the market and a lot of people have watched what they've done since they announced Domain 2.0 about a year and a half ago. And by the way, if anyone doesn't know Domain 2.0 was the announcement that they we're going to move away from buying hardware and they wanted everyone to bring them virtual network solutions as well as SDN so.

Your second question, we have seen our initial revenue around SDN and NFV a majority of it is around VNF validation. One of the areas that carriers like AT&T and others are seeing difficulties with is how all these network functions work together in a robust production environment and its raising the interest and the need for somebody like InterCloud to be doing VNF validation services not only in advance of deployments, but also identifying issues and problems with certain VNFs in certain scenarios. So we believe that it's opened the door -- significant door for InterCloud to prove ourselves as what could become a market leading multi-vendor independent VNF validation company.

Andrew Nowinski

Got it and then -- yes, that certainly does. And then I think on some of these SDN deployment that you're involved in, is that also -- are you seeing an increase in professional services employment as well?

Mark Munro

Yes. It's funny you say that. I think we're just seeing the early stages I mentioned it in our call that we begun to -- we started running training programs last September like three nights a week, two hours a night, starting to train and build a staff on the bench, because we foresaw the need that -- look we've been working with NFV and SDN for over two years ourselves in our own environments in our labs in running our own applications so we've had experienced and have seen how difficult it can be to work with all these different virtual network functions from all these different vendors.

It's very difficult when they point fingers at each other. So what -- I think we've developed a core skill set around professional services offering that's going to offer tremendous opportunities for our company not just recurring revenues built around like route reflectors and a DPoD and other services that I mentioned today but yes. We think its going to be a massive opportunity, we think we're incredibly well positioned and prepared where most are not, most don't even understand SDN and Openstack and all the iterations of all the VNFs working together in those environments. So, yes, we are looking forward to great expansion in our revenue stream around professional services in SDN, NFV.

Andrew Nowinski

That's great. Just kind of shifting gears from a security perspective, you guys [indiscernible] a lot of virtual firewalls as well and I think your vendor agnostic. So I was wondering can you give us any insight in terms of what you're seeing from your customers deploying more virtual firewalls has that increased. And then, also can you give us any [indiscernible] in terms of who you're dealing [ph] in the virtual firewall market?

Mark Munro

Yes. I think I'll talk to clearly security is just an incredible number one issue for every customer in the world enterprise, carrier everybody today obviously as we've seen everybody begun to get hacked. I think one of things I'll point out is that in a virtual network environment right, you're really talking about software and all these software functions running on virtual machines all together in a stack. So it's our belief that security will be even more critical and we've approached it from a different angle. It's not so much that we're trying to compete with Palo Alto or Juniper or other. It's that we are approaching how to manage security from a different perspective so it means you're still going to deploy virtual or physical firewalls like Palo Alto and others, but because we are able to capture all packets from all nodes in an SDN environment unlike 2% to 3% in a physical environment you can see the difference there its enormous in scale. But what does that do?

It means you have to have your own analytics engine which we do and we will continue expand on it. But, in a nutshell and trying to keep it simple and what it does is by capturing these packets and running our own algorithms that our team has designed and built and manages. We've built an automated solution that allows this traffic to be captured analyzed constantly on the go 100% of the time. And what that means is, we believe we will find anomalies faster because every -- just because you have firewalls doesn't mean you're always going to keep everybody out. But what happens when they get in and they lie and wait for six months before they show up at a given node in your network.

We believe that our analytics with constant monitoring and managing of these nodes in a virtual network gives us a tremendous advantage for our customers to have much broader security capabilities, because if you can begin to identify anomalies you start to see a change in geographic traffic, intermodal traffic and things that don't make sense as it's a self learning software. And we think then what it does our software then can either automatically deploy additional virtual firewalls between nodes that don't exist because we think they do exist.

So I think as you can see it's a much more dynamic, flexible and it's a much broader security platform but still includes traditional firewall services that were not going to try to recreate because we can't. So does that help?

Andrew Nowinski

Yes, certainly does. Just a quick follow up there, so in addition to the analytics capabilities that InterCloud provides, would you say that vendors perhaps like a fore event that don't have or even a virtual offering to begin with or at risk of being left behind in as this market moves more to a virtual focused market?

Mark Munro

I do. I think as you know it's very difficult for some organizations to transition when these types of changes come along right. It takes the adoption of somebody thinks sometimes or some of them to get used to learn their staff isn't necessarily trained on SDN; they don't really understand it fully. So you may have a CTO or CIO that's ready but the staff isn't really up to speed which is where you were alluding to the professional services opportunities here are massive because these people got to be trained. And so any way -- the transition here is going to take some time for mid-tier, but what we're seeing is much greater traction at the very large scale enterprise and the SP market and it's being lead by a bigger SPs. We're seeing new RFPs that we didn't see a year ago. We have -- we're talking to most -- all your major carriers and they're all going here, they're just trying to define their process and pick their SDN vendor and find vendors like ourselves that have a fully integrated SDN, NFV package solution that can help speed up their time to market and time to rollout.

Andrew Nowinski

Okay. Last question from me and I'll jump back in the queue. I want to ask what NFV grid, I know that's arguably one of the most proprietary components of your portfolio that others can't replicate, so I'm wondering that NFV grid contribute to revenue this quarter?

Mark Munro

Well, look at it this way. It's contributing to our layer three VPN product. It's at the core of it. It's really at the core of every DPoD and it will be integrated with our DMS management system, which is our DPoD management system. It's really going to be at the core of all of our SDN and NFV solutions that we put out. So, yes, it will be and will continue to be.

Andrew Nowinski

That's great. You have a great story keep up the good work guys.

Mark Munro

Andrew what, I don't think you mentioned -- can you just explain to the callers what, who you are what your role is and where you work?

Andrew Nowinski

Yes. Sure, thanks. So research analyst at Piper Jaffray covering security, storage and networking spaces. So certainly have a best interest in InterCloud given that you have overlap with my entire coverage universe.

Mark Munro

Great. I appreciate. I thought it was important for people to know what your background was and why you're asking all those very specific and good questions.

Andrew Nowinski

All right. Thanks guys.

Mark Munro

Thanks Andrew. We appreciate it.

Operator

We'll take our next question from [Richard Molenskie] [ph] a Private Investor.

Unidentified Analyst

Mark, congratulations, outstanding quarter and more importantly I love the areas that you're moving into. And if you could just give me some information about what are the companies would you say are in the software, are in the NFV sector or the software defined network that's trading publicly right now, try to put evaluation on where we stand versus maybe some competing companies if there are pure plays in this industry?

Mark Munro

Yes. I think that's going to be difficult to do Rich because I don't really know off the top of my head, one of the guys might.

Unidentified Analyst

Okay, no problem.

Mark Munro

No, but I'm going to talk about it, to it. I would say, let's look it this way. There is many different ways of looking at who plays in the SDN and NFV space. So let's talk about the three or four, there is three or four major SDN providers the first part.

Unidentified Analyst

Okay.

Mark Munro

You've got Cisco with OpenDaylight. You've got Juniper with OpenContrail. You've got ALU with Nuage. And really kind of close behind in that arena would be VMware with their NSX platform. So those are your really major SDN platform providers.

Unidentified Analyst

Right, okay.

Mark Munro

That's just one component. So then, of course Cisco, ALU and Juniper in particular also participate in the NFV space, in that they have virtualized their network functions that they sell like their peer routers and their switches and their firewalls and their load balancers et cetera because they all have a product portfolio in the networking space.

Unidentified Analyst

Okay.

Mark Munro

But here is what they don't have. And I'm going to lead back to why there is so much value being created in private companies like Mirantis, Canonical and a bunch of others that our guys could talk to more specifically than I can, but those are big ones around Openstack. Because SDN and NFV still need a broader orchestration platform like an Openstack and the Mirantis and Canonical and Red Hat Openstack those are your players in that space.

What I'm getting at is, you can -- even when I start mentioning multiple names being involved in a platform's ability to deliver all these virtual network functions you can see how it all of a sudden becomes more complex and gets much more difficult for any one of those companies that I've mentioned to integrate and manage and being independent VNF validation partner for carriers and enterprise.

So what I'm getting at is, look there is incredible value being created even in little niche parts of NFV and SDN, let alone in the entire package and delivery of a usable production grade environment, which if you're going to do that you need something like our NFV grid on the top, then you got the SDN, then you've got all your network functions virtualized and then you've got Openstack and all of that sitting on servers or virtual serves, virtual machines.

Unidentified Analyst

All right.

Mark Munro

So it gets complex and it's not simple as they say there is any one company that's going to lead the entire space.

Unidentified Analyst

Okay.

Mark Munro

But we think we've created an environment where we offer the ability to provide not only technology with NFV grid and VNF validation, but also professional services with the skill sets to make it all work and make it all work in an environment that we call DPoD. So we can streamline Tier-2, Tier-3 carriers that don't have the capital that AT&T and Verizon have to spend 100s of millions to try to build things along side these partners to differentiate their platform, but need a partner like us that can actually integrate and package it all into one and that is very, very, very hard to find.

Unidentified Analyst

And --

Mark Munro

And that's the number one to really differentiate.

Unidentified Analyst

I remember one of the calls you mentioned about some private companies that were brought out, purchased by a company, has there been any recent in the last few months four or five months about the private companies that were may be bought that has been, okay, anything you have you could talk about --

Mark Munro

Aqeel, may be you can talk to I know that Brocade just literally bought two in the last month. One of them was more of a datacenter centric software. But maybe you could talk a little bit Aqeel about some of the acquisition at either Cisco or Brocade and any others have made that would be relative to where we're headed if you don't mind. Did I lose Aqeel?

Operator

You might have lost him.

Mark Munro

Aqeel are you on? We may have lost him.

Operator

Mr. [indiscernible] your line is open, you may want to press your mute function.

Unidentified Speaker

Yes. Can you hear me guys?

Mark Munro

Yes, you're back.

Unidentified Speaker

Okay, very good. There were several acquisitions done by Brocade in the recent quarter. They're specifically targeting companies that are in SDN, NFV space as well as -- as well as on datacenter side. There are several acquisitions done by other vendors by Cisco I believe, which are specifically targeting a particular deployment on cloud side, a particular deployment SDN, NFV side. I'd like to mention -- probably I'd like to mention another -- I'd like to mention another acquisition that is recently going on with Brocade. So the targeted focus for this acquisition is basically very condition of the market that there are particular focus on the SDN and NFV on this particular technologies?

Mark Munro

I mean Richards, its fast and furious, its happening all the time.

Unidentified Analyst

No problem.

Mark Munro

I had a few prepared for that call about six months ago and I mentioned them specifically but --

Unidentified Analyst

Yes. You did.

Mark Munro

It won't stop. I mean it's --

Unidentified Analyst

Right.

Mark Munro

There is too much going on and all these vendors think about it, [a list of Brocade] [ph], every single one of these guys that has virtual networking functions, if they don't have a full package or the ability to offer the full package what happens? They just sell a virtual network function into that environment, but in the new environment I can turn up and turn off a virtual network function in a minute. I don't have to order it, ship it, install the hardware. So what does that do? It makes them a little less relevant because it gives the customer or the service provider a much easier transition to move around between vendors and change as technology is being delivered quicker by this other specific or new vendors potentially.

So, if you don't have your hands in the entire stack, it's going to become -- you are going to become less relevant and more at risk. So you are going to see these people continue to buy partners that can deliver the full footprint and add value and specific software around orchestration and management in particular because that's going to add value to their network functions and hopefully give them the ability to make sure their network functions are being sold into that customer.

Otherwise, they are going to run the risk that they are going to be left behind. So you can see the risk reward and the demand for these companies to be bought and purchased.

Unidentified Analyst

Just couple of quick question, and I will let someone ask. This is a recurring revenue model, isn't that -- what you are planning on doing?

Mark Munro

Yes. It's a little of both. You heard the question from Andrew and talk about professional services. It's -- look when we talk about this, I know its complex to you guys and people that aren't in the industry. But, it's also complex for the carriers and the people that are in the industry. So the need for people that have the capabilities and knowledge around Openstack and SDN and VNS across the board, it's going to be very high. And that's what we -- that's what we've built, our team is over 70 people and we have the skill sets. So, not only do we have products -- recurring product revenue, but we also have the skill sets in the professional services side for billing, for integration and ongoing management and support for these companies as they rollout these massive networks.

Unidentified Analyst

Okay. Last question, I know, I read one, what is that, you are buying stock, I think a couple of Board members, can you please refresh my memory of how many shares you guys bought personally because I was like to look at the inside of buying from the inside, minus my last question.

Mark Munro

Yes. The last time we were allowed to buy was before the end of the year but as you know. But, we -- myself and Mark Durfee I believe -- who is a Board member in InterCloud. I believe in December, we bought about $100,000 worth of stock each and around $1.25 or $1.35 in that range. In addition to the stock, we have already bought in the past and continued on.

Unidentified Analyst

All right. I appreciate it guys. Great job. Thank you so much.

Mark Munro

Thanks Rich. I appreciate your support.

Unidentified Analyst

Okay. No problem, of course.

Operator

And with no further questions at this time, I would like to turn the call back over to Mark Munro for any additional or closing remarks.

Mark Munro

I'd just like to thank everybody for spending the time. And I would also like to thank everybody who is a shareholder for continuing to support us as we look forward to an exciting 2016 and beyond. Thank you.

Operator

That does conclude today's conference. Thank you for your participation. You may now disconnect.

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