GEO Investing

Altigen Communication (OOTC:ATGN) ($0.17) – Reported record breaking Q1 2015 profits and revenue growth.

Reasons for tracking: We are taking a closer look at Altigen Communication is because it appears to fit right into other software companies we have established positions in  that transition to a SaaS product offering.  Quote from conference call:

“As discussed in prior calls, AltiGen has been working hard to transition to cloud business model. For our cloud business, we have two distinct delivery models. The first is based on the AltiGen Cloud in which our MaxCS IP-PBX software is deployed in our datacenter and delivers a monthly SaaS subscription service.”

After perusing the related conference call transcript it appears that more profitable revenue growth is be driven by its new SaaS product.   Quote from the conference call:

“Our first quarter net income of $420,000 compares to the previous quarter net income of $146,000. The quarter-over-quarter increases in both revenue and margins, which we’ll talk about, were primarily a result of increased sales of our MaxCS all software IP-PBX platform along with continued growth in the delivery of MaxCS on a software-as-a-service or SaaS model. The results also reflect a decreasing contribution from our hardware products”

AltiGen switches to SaaS model to increase revenue

Although a switch to a SaaS  model can lead to a temporary  slowing of top line growth, the model should lead to improved margins.  From the conference call:

“AltiGen has been migrating away from dependencies on proprietary hardware technologies which includes servers, telephony boards and telephone.”

“ During the transition phase from hardware to software, we will experience an impact on top line revenue as AltiGen proprietary hardware is replaced by industry standard hardware products. However, this model will also allow us to improve our margins by shifting revenue from our hardware to software licenses which are required to enable the functionality of AltiGen Solutions with third party hardware products.”

  • At 79.8% it carries tier one SaaS gross margins
  • Significant operating leverage exist as evidence by the fact that  year over year quarterly operating expenses remain unchanged even though revenues increased.
  • Valuation seems very compelling as it appears shares are trading at only 2 times cash per share and a price to sales multiple of 0.8.


  • Appears that management is not ready to concede that the company is in position to deliver consistent profitable results. We will request an interview with management immediately.

“We’ve traditionally not provided any guidance of any kind going forward. One of the reason is we’ve got a short operating history here and the last we had profit for last two quarter. So we’re cautionary optimistic that the future is going to continue to do well but again it’s kind of premature for us to get used to reporting profits back-to-back, so hopefully we’ll be able to continue with this trend.”