- Siyata Mobile has 3 product lines, all in high-growth areas – Push-to-Talk-over-Cellular and Cellular boosters.
- Since its IPO in Canada in 2014 Siyata has been a company in development. while it had low-end sales, mostly in Israel, Siyata was working on FirstNet-Apporoval, product-development and carrier-type-approvals.
- In 2019-2020 the business started to accelerate in North-America Siyata got type-approvals and entered AT&T and Verizon, in addition to launching a booster-line for first responders.
- A month ago Siyata raised ~12M USD in equity to in order to register on Nasdaq and to fund working-capital, all in preparation for what I expect to be a breakthrough year.
- In my estimates Siyata, with a market cap of ~15 Million USD including the 12 Million USD cash it raised, could trade at >90 Million USD within 1-2 years, and >250 Million USD within 3-4 years, even assuming a 10X P/E multiple for a growth company.
Who is Siyata Mobile
Siyata Mobile is a telecom equipment company with Israeli roots. Siyata provides cellular communication systems for enterprise customers and first responders in three product categories: push-to-talk over cellular (PoC) in-vehicle devices; rugged PoC phones; and cellular boosters. These products are perfect complements as they each provide solutions required by Siyata’s target markets; are sold to the same end customers; and are delivered primarily through carrier channels.
Push-To-Talk Over Cellular (PoC)
Before we talk about PoC let’s talk about the legacy competing technology – Land Mobile Radio (LMR) – which provides low bandwidth 2 way communication. LMR is a decades old technology that is used by first responders, bus and truck drivers, oil and gas, logistics, hospital workers and many more. However, LMR is an inefficient solution that offers only limited capabilities. Chief among its many shortcomings are:
- First, LMR hardware is expensive and its networks are expensive to build and maintain.
- Second, there are more than 10,000 LMR networks throughout the U.S. which are often incompatible thus creating communication barriers amongst users. Third, these networks suffer from limited range and poor coverage.
- Finally, LMR solves only one problem – radio connection to dispatch. Therefore, drivers have to use many other third party devices to deliver everything they need, thus compounding costs and complexity.
The aforementioned limitations of LMR spurred U.S. Congress to create FirstNet, an independent government authority which is being managed and built by AT&T. FirstNet addresses the 9/11 Commission recommendation calling for interoperable communications for all U.S. first responders.
FirstNet is encouraging the use of PoC technology which uses 4G cellular network connections which allows voice communication (instant one-to-one or one-to-many communications), broadband data, and the use of hundreds of different enterprise apps designed specifically for FirstNet (ex. fleet management, time logging, navigation tools etc.).
PTT Users by Network
Both the LMR and PoC markets have been growing and are expected to keep growing in the coming years, albeit, PoC growth is expected to outstrip LMR growth. As is demonstrated below, from 2019 to 2023, the number of PoC users is expected to grow at a 13.6% compound annual growth (CAGR), almost double that of LMR at a 6.5% CAGR.
Choosing PoC over LMR lowers both capital expenditure (no need to apply for bandwidth, rent or buy expensive radio equipment and build a network, and expensive devices) and operating expenditure (no need to maintain radio network)
Uniden UV350 – The First and Only PoC In-Vehicle Device
Siyata’s flagship device is the Uniden UV350. The UV350 was the first and remains today, the only in-vehicle PoC device approved by FirstNet. It is also approved by most of the leading carriers in North America. It is an IoT 4G Android device that is professionally installed into a vehicle and is purpose built to provide superior sound and noise cancellation, enhanced driver safety, operates in extreme temperatures and is always powered as it is hardwired to the vehicle battery.
A comparison of the UV350 to competing solutions:
UV350 sells for ~1,000 USD including add-ons like roof antennas, palm mics for PTT, extended warranty and other accessories.
Siyata’s second PoC product line is rugged handheld devices.
While the rugged handheld market is more competitive, Siyata’s key advantages are its devices are purpose built and are designed to be low cost disruptors. These are critical advantages in the sectors in which rugged PoC handhelds are popular.
Siyata’s third product line is cellular boosters – a device that ‘boosts’ cellular signals and allows for better reception for calls and data connectivity. As a rule of thumb – if you’re in a place where you have at least some cellular reception some of the time then with a good booster you should have great reception all of the time.
You can install a cellular booster at your country home, on your car, truck, bus, ambulance or police car. There is clear synergy between the PoC devices business and the cellular booster business, especially for first responders where cellular connectivity is critical.
Demand for Siyata’s cellular boosters has been particularly robust this year, with more people working from home, who are demanding robust and consistent cellular connectivity.
Siyata provides a suite of booster products designed for three market segments: in-vehicle, in-home and in-building. Siyata again leverages its carrier relationships to deliver solutions to first responders and enterprise, and on-line channels for direct to consumer.
The potential PoC market can be approximated using total fleet vehicles in the U.S. According to VDC research there are more than 24 million public and commercial vehicles in the U.S., including 5.5 million automobiles:
17.5 million trucks:
And 655,000 buses:
Out of the total users who use or plan to use PoC, 25.3% would want to use an in-vehicle device.
A Product Carriers Love To Sell
Since Siyata has only a few dozen employees, it can’t rely on its own workforce to sell tens of thousands of units door-to-door, and they don’t have to. Besides selling online, Siyata has approvals from major carriers like AT&T and more recently Verizon who control most of the first responder market.
Perhaps the most important metric for a carrier is new activations. Each activation entails an additional income of approximately US$45 a month, with practically zero additional cost to the carrier. Therefore, each new activation is worth thousands and even tens of thousands of dollars in discounted cash flow to the carrier. This is why carriers incentivize their sales staff with ~US$30 per new activation compared to ~US$5 for a new iPhone sale for example.
But how do you generate new activations when practically every child already has a phone? The PoC market opens up huge new opportunities for thousands of new activations, plus device sales! Since the PoC devices are replacing radio units – it makes the big clients (fleet operators) even more dependent on the carriers, and less likely to switch.
Another advantage for the carriers is that Siyata is the only company with a full product line of in-vehicle PoC devices, rugged handheld PoC devices and cellular boosters. So if a client calls AT&T because he is having problems with his audio quality or reception; instead of the car kit manufacturer, PoC device manufacturer and AT&T playing the blame game – AT&T has a one stop shop when the solution is Siyata’s, and besides – because the products are well integrated with each other, such issues would are rare.
Furthermore, Siyata’s product line can sell in bulk. If a dealer finds the right client with a fleet of trucks, buses or vans that could use Siyata’s PoC solution, this could translate to thousands of sales and activations, and handsome commissions for the dealer. Not many (if any) telecom products can generate so many activations from one client.
For these reasons – Siyata’s line of products are the perfect complement for carriers to put effort into selling. Siyata could have potentially thousands of AT&T’s and Verizon’s salespeople fighting to sell its products to get the activation and their US$45 monthly fee, while Siyata enjoys a healthy ~35% gross margin.
In fact, Siyata’s products are so lucrative for carriers, that it is worthwhile for them to subsidize the product’s price for their customers – all to get the recurring monthly fee. For example – AT&T FirstNet subsidizes more than half of the UV350’s price, and lowers it down to ~300 USD for its client.
App recurring revenue potential
I estimate Siyata’s ‘fleet’ of devices will grow over time to hundreds of thousands of active users, from not just FirstNet but enterprise customers such as fleet management, transport & logistics, energy & utility, and construction who have particular needs and expectations from their in-vehicle device.
With its diverse install base Siyata could offer its clients apps they might find usefullike MDM (mobile device management) apps that allow the management of many devices at once (say you want to install a new app on 100 devices. Fleet management apps that allow headquarters to track drivers and blackbox apps that allow the monitoring of the health of the vehicle.
In case of an app subscription Siyata may split the revenue with the developer, making its devices into a desirable real estate.
Numbers and forecasts
Let’s get one thing clear – the investment thesis in Siyata is based on my expectation for its earning-power as of right now, and a few quarters into the future, not on past years’ results. In fact, as I see it, up until now Siyata has been almost a start-up. It was selling almost only low margin products, mostly in the very difficult Israeli telecom market, while it was working on products and type approvals with major North American carriers.
Siyata made serious inroads into the U.S. market only in the last year. It was approved by AT&T in mid-2019 and by Verizon at the end of 2019 and continues to work to close other carriers. Siyata has since launched multiple next generation products across its product categories.
Since it takes ~6-12 months to train and get sales traction with the network of carrier dealers about Siyata’s product offerings. Siyata has reported a growing percent of sales from the critical U.S. market, as such I suspect we are only beginning to see sales ramp and margins march northward.
To give a ballpark estimate of the results I see in a year or two, let’s return to the market forecast for PoC:
As is demonstrated in this chart, the number of PoC users is expected to grow by 700,000 in 2021 (to 5.8 M from 5.1 M). Let’s assume that as a start, 50,000 of the new devices will be Siyata’s – 25,000 UV350s for 1,000$ , 25,000 handhelds for 250$ and 25,000 cellular boosters for 500$ a unit, plus accessories and extended warranties. Total sales of ~$45 Million. This estimate is quite close to Siyata’s current pipeline included in the latest presentation of ~$42 Million, which I expect to grow significantly in the coming months.
I estimate Siyata’s gross margin on these sales will be approximately 35% followed by SG&A expenses of about 8-10$ M – mostly fixed costs that won’t grow much with sales growth.
By this estimation, on sales of ~45 M USD I expect EBITDA of ~7-8 M USD, and since Siytata has accumulated losses of ~35 M USD, cash taxes should be minimal. Due to the mostly fixed SG&A costs, as sales grow, the company expects profits will grow at a much higher rate.
If we go by average industry valuation metrics and assuming my estimations are in the ballpark – it suggests Siyata’s market cap should go up from 17 M USD to ~ 90 M USD. a potential 5 bagger (less so for the stock, more so for the warrant), even looking just 1-2 years into the future.
It should be noted that Siyata has Issued ~2 M, 5 year warrants (SYTAW) with a strike of 6.85 USD, which I think are very tempting, but pay attention to their dilution effect! I think the warrant is a good investment opportunity but since it’s harder to buy, I hold both the warrant and the common stock.
Looking 2-3 years into the future, Siyata aims to reach a pipeline of ~100 M USD. I think it is quite likely Siyata will reach this goal given its aforementioned unique advantages. To reach this goal, Siyata will need to sell about 100,000 devices a year in a growing market with >6 million devices, representing only 1-2% market share. This seems to me like a a very conservative scenario that in 2-3 years Siyata’s EBITDA would be approximately 25 M USD, much higher than its current entire market cap, and with a 10 multiple – a >10 bagger in a relatively short time frame.
I, and the fund I manage, hold shares and warrants of Siyata.
Nothing in this article constitutes investment advice and all content is subject to the copyright and disclaimer policy of the Israel Value Blog.