Celltick, one of Israel’s most veteran mobile telephony services companies, is coming to the TASE. The company published a prospectus today for a $12-15 million IPO of shares and options, which it will attempt to complete at a company value of $90 million before money.
Celltick plans to use the proceeds from its IPO for three main purposes: recruiting more employees in research and development in order to continue development of its products, recruiting marketing and sales employees in order to bolster its overseas marketing activity, and funding for the expansion of its activity to additional markets around the world. Among other things, Celltick plans to consider strategic and business cooperation that will increase its revenue in the long term.
Celltick has raised $45 million from investors since it was founded in 2000 and has accumulated $300 million in revenue. The company stresses that it has been making a profit since 2009, excluding one-time accounting deductions.
At the same time, Celltick had only $2.8 million in cash as of the end of 2017 and reported a $1.2 shareholder’s equity deficit and a $4.5 million net debt. The company’s management said that its current gross debt was $9 million.
LiveScreen generates $1 billion in revenue for operators
Celltick has two lines of products. The older is LiveScreen mobile telephony services and the newer is its Start application. LiveScreen is a platform for delivering time-based messages and providing a place for large communities. The platform is installed at dozens of mobile operators around the world and Celltick says that it has 107 million users on a monthly basis.
Celltick notes with satisfaction that since it was launched in 2000, the platform has generated over $1 billion for mobile operators, from which the company has obtained over $300 million in revenue. Since 2009, the system has also served as an emergency alert platform for governments and local authorities around the world.
In 2017, LiveScreen generated $22 million in revenue, 4.4% less than in 2016. At the same time, operating profit in this sector declined 31% to $5.5 million.
A second product, Start, was launched in 2013. The product serves as a starting screen for Android devices. The company says that Start averages 20 million monthly users and 11.5 million daily users.
Close cooperation in Mexico
As of the end of 2017, the application had been installed in 83 million smartphones, with an average maintenance rate of 32% after 30 days and 21% after 90 days. The major advantage of the application is that in many countries, it reaches the end consumer as a built-in product (which can be removed), not an application that has to be downloaded from a Google Play store.
As of the end of 2017, more than a third of the installations were in Mexico, where Celltick operates in close cooperation with mobile telephony giant America Mobile. In the revenue model for Start, the company records all of the revenue from the product, but immediately passes on at least 60% of it to the distribution partners (50%) and the content partners (10-15%). The company in effect reports its gross revenue from this product, while its real (net) revenue is what the company calls its gross profit, which is only 40% of its gross revenue.
Start is a rapid growth sector for Celltick. The company’s gross revenue from it totaled $1.5 million in 2016 and $6.8 million in 2017. The company projects $11 million in cross revenue from the product in 2018.¬†
At the same time, this sector is also generating heavy losses for the company. Celltick’s operating loss in this sector totaled $8.9 million in 2016 and $7.3 million in 2017. Celltick posed a $1.8 million operating loss and a $5.8 million net loss on $30 million in revenue in 2017.
Celltick launched Start Magazine, an on-demand mobile magazine, last year based on the Start product. The magazine is designed to constitute the company’s growth engine; it is meant to connect content creators with application creators. The purpose is to make it possible for applications to integrate news content in 70 languages from around the world. Revenue from this content and the advertising linked to it will be divided between Celltick and the content and application creators.
The largest shareholders in Celltick (fully diluted) are venture capital funds Jerusalem Venture Partners (JVP) – 35.2% and Amadeus Capital Partners – 25.1%, credit fund Kreos Capital – 9.3%, and CEO Ronen Daniel – 9.6%.
Daniel’s salary and related remuneration totaled $340,000 last year, and he also received a $110,000 bonus, making the cost of his salary $450,000 (NIS 1.62 million). This does not include $2.26 million in share-based payment.
CFO Shlomo Hagai received $253,000 in salary and related remuneration, a $30,000 bonus, and $142,000 in share-based payment.
Celltick spent a total of $1.43 million (NIS 5.14 million) in cash on salary and benefits for its five most senior executives, excluding remuneration in the form of options.