Commercially astute Connected IO reels in Australian and US deals

Silicon Valley-based IoT company Connected IO (ASX: CIO) has secured a potentially lucrative deal with a “major United States telecommunications company” but has remained tight-lipped about revealing its name for privacy reasons, saying that its disclosure is considered to be “commercially sensitive at this time.”

The only bit of information helping investors guess the name of Connected IO’s mystery client is its admission that the deal was with a company with whom Connected IO has “had a historic relationship.”

According to the terms of the agreement, Connected IO will facilitate the telco’s ability to order Connected IO products directly for the purpose of resale in North America. Connected IO says it plans to fulfil such orders and “invoice on delivery” with the right to terminate on 60 days notice.

Commercially speaking, the deal represents an opportunity for Connected IO to have its products promoted on its behalf by “3000+ sales forces” and consolidates the company’s “aggressive growth trajectory.”

Connected IO CEO Mr Yakov Temov said that “the appointment of CIO as a direct sales product is significant given the size of the telco providing an enormous opportunity to increase sales annually as well as developing the relationship over the coming years.”

The news sent Connected IO shares 12% higher by mid-afternoon.

Global IoT expansion

Connected IO has announced a flurry of distribution deals in recent weeks.

The company announced a distribution agreement with M2M Connectivity to boost sales of its products in Australia and New Zealand last week. The deal clearly defined Connected IO’s corporate channel strategy of rolling out its products specifically for the Machine to Machine (M2M) market.

It plans to deliver solutions that leverage existing software made by Cisco, currently deployed on over 3 million devices and 230,000 customers.

The first product to be launched into the Australian and New Zealand markets is Connected IO’s AP-Cat 1 USB modem, a cost-effective industrial grade USB modem for connecting remote assets. T

he product is unique due to its architecture being built on LTE cellular services, which is expected to provide the company with opportunities in “key vertical markets,” according to Daryl Chambers, Director of M2M Connectivity.

Additionally, Connected IO has agreed to collaborate with a US-based cyber-security company to help it develop a production line of co-branded Category 1 routers over the next 3 years. The company signed a Letter of Intent (LOI) to build custom-built prototypes for an unnamed cybersecurity company for an initial period of 7 days for evaluation purposes.

Subject to how Connected IO’s prototype performs in live customer testing, the parties have left the door open to signing a definitive contract.

If the trial period is successful, Connected IO believes it can strike a binding contract with the as yet unnamed cybersecurity company, purchasing around $625,000 of its products each year. Longer term, Connected IO expects to generate around $7 million from the deal over 3 years.

The reason for the frenetic expansion activity could be related to the strong market traction Connected IO has obtained since last year.

The company recently reported that its annual revenue in 2017 was 364% higher compared to 2016, with even more growth anticipated for 2018 due to the number of purchase orders and anticipated contracts currently being received.

Revenue for 2017 was A$2.44 million and this is anticipated surge even further during 2018 with Connect IO already confirming A$2 million in purchase orders, and a further five under negotiation.