Posted on

Sonim Technologies Files For $57.5 Million U.S. IPO

Share



Quick Take

Sonim Technologies (SONM) has filed to raise gross proceeds of $57.5 million from a U.S. IPO, according to an S-1 registration statement.

The firm provides ultra-rugged mobile communication technologies designed for “task workers physically engaged in their work environments.”

SONM is growing at a much faster rate than the industry and has posted a number of impressive financial metrics.

Company & Technology

San Mateo, California-based Sonim was founded in 1999 as NaviSpin.com to manufacture and market ruggedized Android-based mobile phones and accessories designed for the industrial enterprise and public sectors.

Management is headed by CEO and Director Robert Plaschke, who has been with the firm since 2002 was previously Entrepreneur in Residence at venture capital firm Sutter Hill Ventures.

Sonim’s offerings include rugged mobile phones that can connect to both public and private wireless networks, industrial-grade accessories, as well as cloud-based software and application services.

The company’s technology combines the functionality of single-purpose electronic devices, such as barcode scanners, location-tracking devices and sensors into one Android-powered device with access to apps on the Google Play Store.

Some of the company’s main end consumers are typically in the construction, hospitality, energy and utility, logistics, and manufacturing sectors.

Below is a demonstration video of Sonim’s rugged phone durability:

Source: Sonim

The company has developed and integrated dozens of application programming interfaces [APIs] specific for its phones and has partnered with over 800 app developers to create a purpose-built experience.

Management states that as of January 2019, Sonim was the only private mobile phone company to have a stocked ruggedized product with three of the four largest U.S. wireless carriers – AT&T (NYSE:T), Sprint (NYSE:S), and Verizon (NYSE:VZ).

Investors in Sonim Technologies included B. Riley Financial, Azini Capital Partners, Apax Partners, e.ventures, 3i Group, Accel, and SIAR Capital, among others.

Source: VentureDeal Venture Capital Database

Customer Acquisition

The company primarily markets its products through AT&T, Sprint, and Verizon in the US as well as Bell, Rogers (NYSE:RCI), and Telus Mobility (TL) in Canada.

Sales and marketing expenses as a percentage of revenue have been decreasing as revenue has increased markedly, per the table below:

Sales & Marketing

Expenses vs. Revenue

Period

Percentage

2018

9.01%

2017

12.47%

Sources: Company registration statement and IPO Edge

The sales efficiency rate, defined as how many dollars of additional gross profit are generated by each dollar of sales & marketing spend, was a very strong 2.8x in the most recent year.

Market & Competition

According to a 2017 market research report by Technavio, the global rugged smartphone market is projected to grow at a CAGR of 2% between 2017 and 2021 with a year-over-year increase of 1.92% for 2017.

The number of devices sold annually is projected to grow by 0.68 million units by 2021.

The main factor driving market growth is the growing need for mobile devices that can withstand accidental drops and other extreme conditions.

The North American region is projected to account for half of the rugged smartphone market revenue during the forecast period, as can be seen by the graphic below:



Major director competitors that provide or are developing rugged cellphone or related products include:

Source: Sentieo

The company’s offerings combine multiple single-use device functions into one Android-powered rugged mobile phone that gives the end user many applications to choose from.

Financial Performance

SONM’s recent financial results can be summarized as follows:

  • Sharply increased topline revenue and gross profit

  • Stable gross margin

  • A swing to positive EBITDA and cash flow from operations

Below are relevant financial metrics derived from the firm’s registration statement:

Total Revenue

Period

Total Revenue

% Variance vs. Prior

2018

$135,665,000

129.8%

2017

$59,031,000

Gross Profit (Loss)

Period

Gross Profit (Loss)

% Variance vs. Prior

2018

$48,089,000

136.8%

2017

$20,311,000

Gross Margin

Period

Gross Margin

2018

35.45%

2017

34.41%

EBITDA

Period

EBITDA

EBITDA Margin

2018

$2,031,000

1.5%

2017

-$8,385,000

-14.2%

Cash Flow From Operations

Period

Cash Flow From Operations

2018

$3,861,000

2017

-$8,906,000

Sources: Company registration statement and IPO Edge

As of December 31, 2018, the company had $13 million in cash and $62.2 million in total liabilities.

Free cash flow during the twelve months ended December 31, 2018, was $3.1 million.

IPO Details

SONM intends to raise $57.5 million in gross proceeds from an IPO of its common stock, not including customary underwriter options.

Per the firm’s latest filing, it plans to use the net proceeds from the IPO as follows:

We intend to use the net proceeds of this offering for general corporate purposes, including working capital, expanded sales and marketing activities, increased research and development expenditures and funding our growth strategies. We may use a portion of the net proceeds to prepay principal amounts outstanding and deferred accrued interest under the B. Riley Convertible Note (including a prepayment penalty of up to 2.0% of the outstanding principal amount prepaid, which fee is waived if the total outstanding principal amount following prepayment does not fall below $10.0 million). The B. Riley Convertible Note has an interest rate of 10.0% per year, matures on September 1, 2022, and had an outstanding principal balance, including deferred accrued interest, of $13.0 million as of December 31, 2018.

Management’s presentation of the company roadshow is not currently available.

Listed underwriters of the IPO are Oppenheimer & Co., Lake Street, and National Securities Corporation.

Expected IPO Pricing Date: To be announced.

An enhanced version of this article on my Seeking Alpha Marketplace research service IPO Edge includes my full commentary and opinion on the IPO.

Members of IPO Edge get the latest IPO research, news, and industry analysis. Get started with a free trial!

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Ipo Search Results
Author: