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Vringo - Already Cash Flow Positive?

|Includes: XpresSpa Group (XSPA)

While writing a previous article titled Vringo : A Diamond In The Rough... I began to dig into possible revenues Vringo could acquire from the settlements with ADT and TYCO corporation. By using very rough and conservative numbers, the potential revenue was calculated to be anywhere between $2-4M/month. If this is the case and considering Vringo reduce cash burn rate of $1.75M/month for 2014 it is entirely possible that this confidential agreement between Vringo and TYCO has resulted in Vringo being cash flow positive!

As some of you may or may not know, on January 28, 2014, and April 28th, 2014, Vringo reached a confidential agreement with ADT Corporation and TYCO respectively. The agreement resolves patent litigation that was pending in the United States District Court for the Southern District of Florida.

ADT is the largest security company in the Unites state and Canada, serving a customer base of roughly 8 million accounts with $7B in annual recurring revenue.

Similarity, as of 2011 Tyco has US revenues of $17.3B and serves a customer base of roughly 12 million accounts.

Both TYCO and ADT have a combined 20 million monitored sites within the United States. Using an estimate that this technology is used within 20% of retail monitored sites it can be surmised that the infringement could cover up to 4 million sites and is likely to increase considerably as customers enable the remote monitoring features.

Best analysis suggests that the "on-going royalty" could be as high as $1 per site per month. This calculation is likely derived from a 3% licencing fee at $30/month/site.

Ignoring past infringement, Vringo could gross as much as $48 million per year, between both settlements. Once again, I feel the need to reiterate this because of these events Vringo could very well be profitable.

Disclosure: I am long VRNG.