Anyone who has been reading my recent blogs on Seeking Alpha knows that Keek (KEEKF) (KEK.V) has been one of my top picks in 2016. Its recently released ecommerce enabled livestreaming platform Peeks has taken the market by storm. I had another chance to speak with Mark Itwaru over the phone on Wednesday evening. While my previous meetings with him have been informal, we decided that it was an appropriate time to have an official interview where I was able to ask him twelve questions on a variety of topics related to the app and the investment opportunity.
Since the interview was over the phone, Mark's answers to the questions won't be verbatim but will hit all of the major points that he mentioned during the interview. For anyone who wishes to speak with me and other shareholders about this investment opportunity, join the Peeks (Keek) Investor Group on Facebook.
Before I dive into the interview, I want to go on a bit of a rant. While KEK has already been a 200% gainer for me, I haven't sold a share. I have a $1 price target on the stock but I can see a path to a much higher target and Mr. Itwaru's answers reinforce that. For anyone who watches Shark Tank, you may have seen Chris Sacca on the show. He is never shy about pointing out that he was an angel investor into Uber at a valuation of a few million dollars. While that is good for him, this is as much a privilege of having an opportunity to invest in the company as much as it is him being a savvy investor. If I was a millionaire venture capitalist, I would have loved to invest in an early-stage Uber as well.
Peeks is my Uber. While I was in early, KEK is still a rare opportunity to invest in a publicly traded company at less than $50 million market cap for what is essentially a 30% stake in the Peeks technology, management expertise and vision. Peeks certainly has the potential to eventually turn into the next Uber or Snapchat with a multi-billion dollar valuation. There are risks (which I have outlined here) but I believe that those who can ride a potentially bumpy road as the company navigates through those risks will be handsomely rewarded. The technology appears solid. The monetization strategy is already active and generating revenue. The next step is getting the app to go viral and the company has access to 75 million legacy Keek users to help it gain critical mass.
Here are the twelve questions that were answered by Mr. Itwaru. Any additional comments that I wish to make based on his answers will follow in parenthesis.
Q1: Some investors might not be familiar with your background. Can you give a brief introduction of who you are, your experience in the payment processing industry and why you decided to invest in a significant personal stake in KEK and become its CEO?
A1: Mark started his career in technology in the late 1990's working for AT&T and building communications systems. In 1999 he left to start his own payment processing company Navaho Networks which processed billions of dollars of transactions. He first developed the concept of social commerce which laid the groundwork for Peeks through his holding company Personas in 2013. He has spent $19.3 million to develop the technology behind the current and forthcoming livestreaming, broadcasting, monetization and ecommerce capabilities of Peeks. The majority of that funding came via his own personal investment.
You can visit Mark's LinkedIn page here.
You can review a list of patent and patent applications owned by Mark Itwaru here.
Q2: There are many social media and video sharing apps and websites out there and the industry seems to be changing almost daily. Some offer livestreaming capabilities, others offer revenue sharing programs for eligible content generators. Many of them already have millions of users while others like Vine are being shut down. What do you believe will differentiate Peeks from the rest of this group?
A2: There are two distinct advantages to using Peeks. While other revenue sharing sites offer stickers which can be purchased by fans and given as gifts to content providers which can be redeemed for money, Peeks pays in real money. This is important because the sticker process of those other apps rely on OS infrastructure which means Apple or Google takes a 30% cut off the top. The remaining 70% is then shared between the broadcaster and platform. Peeks' real money solution means 100% of the tips generated will be shared between Peeks and the broadcaster. Peeks allows all users to earn a revenue share of tips while other platforms only allow eligible users.
The second advantage is that the ecommerce engine to be built into the service will allow broadcasters to have their own shopping channel where they can sell goods and services and teach educational courses, among other things, within Peeks. So while other competitors can only reward for broadcasting tips, Peeks will be able to do that as well as offer global marketplace solutions.
Q3: For those users who are onboarding from Keek, what can they expect to change and what will remain the same in terms of video uploading capability and user experience?
A3: Very little has changed for Keek users. All followers, likes, posts and their usernames will remain unchanged. They will still have Keek functionality to upload videos as well as the ability to livestream and earn tips. They are even able to earn tips on old Keeks.
There were two issues that led to some early resistance to the change from Keek to Peeks. First, data for some users took a couple of days to load and some users thought they lost all of their activity despite the company's best efforts to alert them otherwise. This is no longer an issue. Second, some users did not like the user interface. Peeks has changed its interface to mimic Keek's, based on focus group feedback that was very positive. This new interface will be available shortly in the next update to the app.
Q4: You have recently disclosed that you are adding an average of 6,000 users a day. Are you pleased with this level of growth and with the technical performance of the app so far?
A4: Mark is pleased at the growth as it goes well beyond what competitors have seen at similar early stages of their existence.
Q5: You debuted the full release of Peeks with the Halloween party on October 31. Do you have any comments on how you think it went in terms of technical performance, content, viewership and brand sponsorship? Do you have any plans to host similar events like this in the future?
A5: The goal of the Halloween Party was to demonstrate the technical ability of Peeks to show a high-quality, professional broadcast with professional equipment. The party was a five-hour, uninterrupted livestream which allowed viewers to interact live with the broadcasters and each other. Mark is confident that after this event, Peeks is ready to be used as a global monetization tool.
Mark is very excited about Peeks' future capabilities currently in development. He is touting the future availability of very advanced broadcast tools that should attract large players in the industry. Capabilities such as camera shots with special effects and recording with drones to create high-quality, polished content.
He envisions a future for Peeks where at an event a user decides to livestream. Should more users decide to livestream the same event, they will be routed under one family of streams. The viewers would then be able to pick and choose which stream to view, similar to how coverage at a sporting event involves multiple cameras to show different angles and areas of the field. Except in this case the viewer would be able to see whichever stream they would want.
Q6: The offer box for marketplace and ecommerce solutions on Peeks has been talked about for a while. When can users expect this concept to be released?
A6: The offer box is currently in beta testing and will be available soon after that.
Q7: Some investors have been using Peeks and have encountered bugs or have other feedback they wish to share. I'm sure that the company appreciates feedback from engaged investors but I can understand if the number of requests may get overwhelming for you. Is there a contact person or email investors can use to provide feedback specifically related to the app?
A7: email@example.com. You can also send feedback through the app. Peeks has a 24/7 customer service department.
Q8: Is Peeks currently generating revenue share through the tipping mechanism? Are you pleased with this very early stage adoption of Peeks' monetization concept?
A8: Yes. Peeks has generated revenue every day since August 3, the first day that the app went live. Mark is pleased at the growth rate of the month-over-month transaction volume.
Q9: Since monetization has started from day one on Peeks, investors are understandably excited about its revenue growth prospects. However, Venture reporting deadlines can be somewhat slow. Q3 ending November is due out at the end of January and the audited report for the year ended February is due at the end of June. Do you plan to update the market should revenue milestones be achieved prior to these deadlines?
A9: There are no plans to release any "preview" unaudited revenue numbers. Mark's preference is to report full financials within the reporting guidelines and timelines.
Q10: Social media can be an extremely cash-intensive venture. Especially in the growth phase when companies might be prompted to spend heavily on marketing. You have forecasted a rather lean $150,000 to $175,000 in cash expenses a month. Exercising of all in-the-money warrants and options (including those recently exercised) brings in over $4 million in cash to the company but Peeks also has $3 million in payables. There is a reasonable market expectation that you may have to finance within the next 12 months. What are your comments regarding the current state of the balance sheet and any near-term future need for financing?
A10: Mark noted that KEK's CFO would be best equipped to answer this question, though he still gave his take on the situation. First off, the company is not entertaining a financing any time soon and not at these current market prices for the stock. He believes that warrant exercises will cover any cash needs for the next several months and that the company will be cash flow positive shortly. He noted that his holding company owns a lot of warrants so he can control some of the timing related to warrant exercise.
Regarding the low burn rate, he would also like to make clear that Peeks as a whole is actually spending a lot more than $150,000 a month. $150,000 is the amount that is allocated as Keek's share of the expenses. Personas is spending three times as much on Peeks as Keek is right now. Mark was quite proud that between Personas and Keek, Peeks is 100% Canadian built with all technology developed in-house.
(Review my assessment of the company's financial situation here. Based on my analysis, I believe that the comments Mark has made with respect to the possibility of a financing is reasonable if a sufficient increase in revenue is achieved)
Q11: What is your long term strategy with Peeks? Do you intend to operate it as a standalone company, licence the technology or do you think Peeks will be bought out?
A11: Mark's intention is to operate Peeks as a profitable, standalone company to bring it to the highest level of success as possible. His goal is to grow Peeks into a successful social media, broadcasting and ecommerce company.
(So unlike many other social media plays, the Peeks business model is not explicitly built with an exit strategy or an attempt to solicit a buyout. Though I believe Mark would entertain an offer at the right price)
Q12: The lawsuit with KIK came to an agreement with the Keek name and trademark being retired. You are in process of retiring the app name and onboarding old Keek users onto Peeks. When do you plan to change the company's name?
A12: The plan is to change the company's name by the end of November.
That concludes the interview. Hopefully Mark Itwaru's answers have clarified some issues surrounding the investment thesis for Peeks for current and prospective shareholders.
Disclosure: I am/we are long KEEKF.
Additional disclosure: I hold positions in securities as disclosed in this article. I have not received any compensation for this article and all opinions reflected herein are my own. The information provided herein is strictly for informational purposes only and should not be construed as a recommendation to buy or sell, or as a solicitation of an offer to buy or sell any securities. There is no guarantee that any estimate, forecast or forward looking statement presented herein will materialize and actual results may vary. Investors are encouraged to do their own research and due diligence before making any investment decision with respect to any securities discussed herein, including, but not limited to, the suitability of any transaction to their risk tolerance and investment objectives.