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Dustin Moore is a researcher and analyst focusing on overlooked and undervalued investments. He enjoys analyzing under-the-radar companies with massive upside potential and those with favorable risk/reward ratios. On Twitter! @dustinrmoore https://twitter.com/dustinrmoore
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  • Elephant Talk And VaildSoft End Of 2012 Update/Blurb 0 comments
    Dec 9, 2012 11:55 PM | about stocks: ETAK, FICO

    Although I think the price is probably topping out in the short term (market cap here is $145 M), I'm perhaps more bullish on Elephant Talk long term now than have been for about a year now. 2012 was quite a disappointment and frustrating from my point of view. The year offered little in the way of making Elephant Talk a good investment, and the share price reflected that, falling from just under $3.00 to just over $1.00. There were some business progress made. For example, ValidSoft services went live with a major bank via Adeptra. But everything in 2012 seemed to move in slow motion. A German contract being suddenly put on hold did not help either (appears to be outside of the company's control). Much failed to materialize on time. Management unfortunately has a credibility issue at hand.

    On the other hand, the mobile and security services revenues continue to grow at tremendous rates Y/Y (well over 100%) with high margins. These service revenues have also proven quite reliable in their ability to grow rapidly, demonstrating resilience throughout bumps in the road.

    I do think the company is better positioned now than ever, once the cash position is bolstered. They are on track to achieve "positive operational cash flow by early 2013", excluding non-cash expenses and capital expenditures. In all honesty, we've heard that before. But once they get their short-term cash issues resolved, I think they are close to reaching a tipping point where things will begin turning. The stock price may begin to catch up with the business progress.

    Elephant Talk's MVNO service side of the business in many ways has been proven, producing revenues with high margins. But they need to get more contracts signed and subscribers moved to their platform. They recently announced a major win on the conference call which "…increases the geographic footprint of Elephant Talk's mobile virtual network operator business into at least two new European markets."

    A soft launch is scheduled for later in the fourth quarter for a new contract, with a full launch expected in early 2013. Contract is said to be massive, adding millions of subscribers over the life of the contract. Thus revenues should grow Y/Y. This, coupled with the Vodafone Spain contract, will produce millions in solid revenues for years to come.

    But contracts like Zain need to materialize into revenues to take the company to the next level. Since these services are so high margin, once subscribers move over the platform, revenues will build quickly.

    -ValidSoft and FICO-

    ValidSoft's most important partner, Adeptra, was acquired by FICO earlier this year. This concerned me a bit initially, as it wasn't clear how FICO was going to move forward and if Adeptra's current work with ValidSoft would be put on hold. However, this development is now proving more positive for ETAK than I previously thought.

    FICO has 5,000 clients. Their risk engine processes 70% of worldwide transactions. The company reported that FICO has subsequently expressed interest in ValidSoft products. This presents a great opportunity for ValidSoft to partner with a massive company, through which it could serve a large market. A meaningful relationship between ValidSoft and FICO would be a real game changer for the company.

    But the question is, will FICO be interested in implementing ValidSoft technology?

    1. ValidSoft states they have interest.

    A few weeks back on the quarterly conference Pat Carroll commented: "Since the acquisition announcement we've had some preliminary conversations with FICO management and they have expressed great interest in our ValidSoft products."

    2. In mid-November, FICO announced the hiring of a new CIO, a position that had been waiting to be filled for quite some time. The CIO is now Tony McGivern, formerly the CEO of Adeptra (before it became part of FICO of course)

    http://blogs.wsj.com/cio/2012/11/15/give-him-credit-fico-names-new-cio/

    https://twitter.com/dustinrmoore/status/270732667824246786

    McGivern is a clear proponent of ValidSoft tech, as he was CEO at the time the company selected and integrated VS technology into Adeptra's decision engine. Having someone with the knowledge of ValidSoft technology, let alone belief in it, bodes very well for a relationship between ValidSoft and FICO. This could be a key development.

    I thought that name sounded familiar, so I did some digging.

    The link to an article detailing Adeptra's roadmap article no longer functions. But I happened to save on excerpts from a presentation that was co-moderated by ValidSoft…and by none other than Tony McGivern.

    "Maintaining the technical edge: the

    Adeptra roadmap....Securing

    the channel was later debated with views

    on call-forwarding and SIM swap comoderated by Tony McGivern and

    Validsoft‟s John Petersen.

    Real world case study: Santander

    Santander‟s head of Fraud, Karen Tyler,

    invited the group to a user-experience of

    Santander‟s double award-winning fraud

    ecosystem. Highlighting the enterprise-level

    fully-integrated elements, Karen explained

    how Santander works with Adeptra to

    integrate other fraud solutions to deliver a

    truly enterprise wide solution, often without

    the need of internal IT resources.

    The solution is being further enhanced to

    include 3D Secure transactions, securing the

    channel through SIM Swap and call

    forwarding. Anonymous proximity services to

    reduce false positives, Knowledge based

    authentication for step-up ID&V and finally

    using the agent interface for final call

    disposition and charge back stop. This is

    under pinned with the use of the Adeptra

    Decision engine as the source of data

    integration and aggregation."

    3. FICO also has just added ValidSoft as a partner on its website, per a VS tweet.

    http://www.fico.com/en/Partners/Pages/Platform-Technology-Partners.aspx

    A Cached copy of that link shows that ValidSoft was not listed there earlier in the week.

    http://webcache.googleusercontent.com/search?q=cache:jQEswnGjDmQJ:www.fico.com/en/Partners/Pages/Platform-Technology-Partners.aspx+&cd=1&hl=en&ct=clnk&gl=us

    -More on ValidSoft:-

    Santander appears to have taken first place for "Best Security Initiative" in the Banking Technology Awards 2012 competition. http://awards.bankingtech.com/files/2012/12/BT-Awards-2012-Final-List.pdf

    ValidSoft ‏@ValidSoft

    @BankingTechno #BankingTechnologyAwards2012 Winners t.co/XHi5HMi";. congrats #Santander for great win. Great night 4#FICO#ValidSoft

    In addition, the Q3 Conference call has some interesting notes.

    1. "Continuing on the revenue generation front, and the live report that ValidSoft received confirmation that a major U.K. bank will proceed with the production implementation of VALid-POS, our card fraud prevention solution to our partner Adeptra. This is a major step forward while contract still must be signed, we're delighted to have reached this decision milestone."

    2. "…another major U.K. bank is close to reaching a similar decision for both VALid-POS and VALid-SIM. We are finally achieving the traction that we envisaged.

    3. VS has processed > 5M transaction with the bank that went live via Adeptra in Q2. Bank showing interest in other products.

    Also, on the recent conference call, it was announced ValidSoft was "..awarded the contract with a leading financial institution in the United States…a houseful name for its core Authentication and Transaction Verification Solution, VALid." There will be 2 phases:

    1. The implementation phase and live production, taking about 6-9 months.

    2. Live production, transaction based revenue model (roughly $0.5 million and $1.5 million/year/product)

    Q3 transcript from: seekingalpha.com/article/994001-elephant...-transcript

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