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Wednesday, October 21, 2020

The Quintessential Battle for InterCloud Systems Inc (OTCMKTS:ICLD)

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InterCloud Systems Inc (OTCMKTS:ICLD) has shown some positives in recent action following a series of announcements possibly supporting the idea that top line growth can accelerate enough to make up for larger concerns about the company’s troubled balance sheet. Long time followers of the stock know that this is not a new narrative. It’s been a battle between dilution risk and sales growth for years, with dilution risk usually coming out on top over time.

Is this time different? We want to take a peek at the company’s latest release to offer up some basis for thinking about the question. Specifically, the company recently announced that it has been awarded over $1.5 million in new contracts for professional services for new and existing customers. According to the company’s release on June 16th, a majority of the work is expected to begin immediately.

InterCloud Systems Inc (OTCMKTS:ICLD) offers cloud data and network management and security to telecommunications companies. That’s the gist here.

As the company tells the story, it provides “end-to-end IT and network solutions to the telecommunications service provider and corporate enterprise markets through cloud platforms and professional services in the United States and internationally.”

InterCloud operates through four segments: Applications and Infrastructure, Professional Services, Managed Services, and Cloud Services.

ICLD offers various services, including platform as a service, infrastructure as a service, database as a service, and software as a service; and network management, 24x7x365 monitoring, security monitoring, and storage and backup services.

It also provides software-defined networking (SDN) training, SDN software development, and integration, virtualized network functions validation in a multi-vendor environment, unified communications, interactive voice response, and session initiation protocol based call centers, as well as structured cabling and other field installations.

According to company materials, “InterCloud Systems, Inc. is a leading provider of cloud networking orchestration and automation, for  Software Defined Networking (SDN) and Network Function Virtualization (NFV) cloud environments to the telecommunications service provider (carrier) and corporate enterprise markets through cloud solutions and professional services. InterCloud’s cloud solutions offer enterprise and service-provider customers the opportunity to adopt an operational expense model by outsourcing cloud deployment and management to InterCloud rather than the capital expense model that has dominated in recent decades in IT infrastructure management.”

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As noted above, we are seeing improved tone to the action on the chart for ICLD of late, with the principal catalyst driving that action clearly being the company’s latest announcement of new deals feeding into the top line for the stock.

Mark Munro, CEO of InterCloud Systems stated, “As we have previously reported, we continue to divest ourselves from non-core assets while reducing debt. Additionally, we continue to make significant strides in reducing salary and wage expense and SG&A expense. We will continue to focus on our remaining traditional IT services companies while presenting our NFVgrid platform to Fortune 500 companies in the carrier and enterprise sectors. Our goal is to become cash flow positive, make strategic acquisitions at the appropriate time and focus upon shareholder value.”

However, as we noted above, ICLD is a battle between sales growth and dilution risk. At present, the company’s most recent official updates show a massive debt problem and sales contraction over recent quarters on a year over year basis. One has to assume that will set the bar higher for prospective investors. The company’s recent announcement of new contracts is the second such announcement in the past month. So, the groundwork is laid for shifting expectations. However, the hole to fill is seriously deep.

The Final Word: At this time, carrying a capital value in the market of $17.3M, ICLD has a chunk ($816K) of cash on the books, which is balanced by about $34.7M in total current liabilities. One should also note that debt has been growing over recent quarters. ICLD is pulling in trailing 12-month revenues of $74.3M. However, the company is seeing declines on the top line on a quarterly y/y basis, with revenues falling at -21.6%. You can bet we will update this one again as new information comes into view. For continuing coverage on shares of $ICLD stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

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