New contract further endorses Etherstack’s global profile

By Trevor Hoey. Published at Dec 12, 2016, in Technology

Wireless technology company, Etherstack (ASX:ESK), has followed up an important announcement last week regarding the award of a contract with news that it has been chosen by global structures and logistics group, ATCO Electric, to provide additional sites and capacity for a mission-critical radio communications network supporting its electricity distribution and transmission operations in Alberta, Canada.

It is worth noting that ESK’s share price increased from 21.5 cents to hit a high of 28 cents last week following the announcement in relation to the digital radio network expansion order, representing an increase of 30%.

However, this is a speculative company and potential investors should not base investment decisions on prior share price performance. Investors considering this stock for their portfolio should seek professional financial advice.

From an operational perspective it is important to understand that ESK’s APCO P25 network solution has been deployed in the ATCO electrical network since 2010 with ESK providing support over the last five years.

Repeat business testament to ESK’s technological and service ability

Contract extensions have been a hallmark of ESK’s operational progress over the years, which in itself is an endorsement of its efficient performance, as well as being a pointer to the company’s prospects of winning new work and repeat business.

The first phase of the new expansion contract is planned for delivery in the current financial year and is expected to contribute to fiscal 2016 revenues.

Recurring revenue model provides income visibility

Looking at ESK’s broader revenue model where technology licensing is involved, contracts such as these provide important income visibility as clients typically pay recurring royalties on sales of products shipped under their own brands, and long royalty tails are typically between seven years and 10 years for the lifespan of a client’s product line.

ESK’s Chief Executive, David Deacon said the current deliveries, additional phases and recurring support revenues are expected to generate approximately US$3.1 million in total over the next 4 to 5 years depending on the final network rollout plan.

From an operational perspective, this is a significant development for the company given that it involves the full deployment across 80 sites in the Alberta Province.

Establishing a strong presence in the essential services electrical utilities industry

It is also a further endorsement of the group’s technology as it comes on the back of a multi-million-dollar order to deploy a greenfield 900 megahertz P25 digital radio network across 13 counties in New Jersey for First Energy’s Jersey Central Power and Light subsidiary.

ESK boasts a particularly impressive client portfolio across the government and commercial sectors as can be seen below.

Summing up the importance of this new contract win in the context of the company’s broader promising performance in 2016, Deacon said, “2016 has seen ESK win important new and repeat business in the electric utilities sector, and it reflects well on our global reach and ability to win and deploy complex communications networks around the world that form part of the essential services of our communities”.

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