Spectrum Global Solutions (OTC: SGSI), a leading provider of telecommunications engineering and infrastructure services for enterprise customers and Tier 1 carriers across the United States, Canada, Puerto Rico, Guam, and the Caribbean, announced impressive third quarter results Tuesday, with revenue up more than 300% from the year ago period to $9.7 million and more than $400,000 net income, or $0.04 per share on a fully-diluted basis.

Why It Matters: SGSI currently trades for a market cap that is barely more than the net income it generated in the third quarter. Its revenues for the period are nearly 20 times its market cap. This should come as no surprise to investors who have been following the story, as the company has announced contract wins nearly every week, the majority worth more than $1 million each. With its track record for contract wins quite firm, it’s only a matter of time before SGSI reaches profitability on a trailing 12-month basis, at which point the stock will likely be trading for a more realistic and significantly higher valuation.

Key Quote: “We are experiencing consistent revenue growth from our AW Solutions and ADEX subsidiaries, that is much stronger than the prior year and expect to continue this growth pattern both organically and through strategic, accretive acquisitions.” – Roger Ponder, CEO

  • Spectrum Global Solutions (SGSI), a small telecom services company, generated $17.1m revenue in the first half of 2017 (inclusive of Acess acquisition) and is on track to generate $35 million in sales for fiscal 2018

  • Telecom companies historically trade between 1x-2x sales

  • If SGSI traded at 1x sales, the Company would be worth $35 million, and if it traded at 2x sales, the company would be valued at $70 million

  • For a company that generated $18.8 million in 1H18, and is expected to generate revenue of over $34 million in 2018, SGSI is significantly undervalued

  • While there are no guarantees in the microcap space, as there are many factors that can affect the price of a stock, if SGSI traded at the multiples of its peers, then investors could realize substantial returns.

Spectrum Global Solutions (SGSI) a single-source provider of end-to-end next-generation wireless and wireline network services and staffing solutions to the service provider (carrier) and corporate enterprise markets that operates through its subsidiaries AW Solutions and ADEX. The Company is a leading provider of telecommunications engineering and infrastructure services across the United States, Canada, Puerto Rico, Guam and Caribbean.

SGSI is a holding company for next-generation telecommunications solutions for major customers across the United States, Canada, and the Caribbean. Through its acquired subsidiaries AWS and ADEX, the Company provides core and comprehensive outsourced services and solutions to leading wireless and wireline telecommunication carriers, utilities, aggregators, OEMs, PMOs, and enterprise clientele. ADEX generated over $20 million in gross revenue in 2017. The Company expects to generate in excess of $34 million in revenue in 2018.

Internet and phone network in city

SGSI is targeting acquisitions in the telecom sector with significant opportunities for growth (revenue projections of $10 million to more than $50 million and positive EBITDA growth). The acquisitions will drive further long-term growth in shareholder value for SGSI. This diversified portfolio approach provides investors with risk reduction while maintaining potential for significant upside.

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  • SGSI generated $18.8 million in revenue in 1H18

  • 2018 revenue forecast of over $34 million
    • Peers trade on average 2x sales (SGSI at 0.2x sales)

  • Proven ability to retain and support Fortune 1,000 and Tier 1 carrier accounts

  • SGSI targeting acquisitions in telecom sector with opportunity for growth (revenue projections of $10-$50 million and positive EBITDA growth)
    • Replicable, scalable service model with industry-leading strategic partnerships

  • Proven management team with 180+ years’ executive leadership experience

  • Telecommunications sector is set to explode with new technology deployments thru 2025, to include
    • Increased small-cell densification
    • 5G and FirstNet
    • Fiber-optic backhaul transport
    • IOT (Internet of Things)