Information about cVidya, the Israeli revenue assurance vendor, is so minimal, scatty and unreliable that even when you collect it all and piece it together, you rarely get a full or convincing picture of how their business is doing. But, thanks to a slip-up by Hezi Zelevski, their Vice President of Corporate Development, it has now been revealed that cVidya experienced zero revenue growth over the last two years.
Last week I blogged about cVidya’s announcement that 2011 revenues were up 25% from 2010, and how Globes had reported their total revenues were in the range of USD60M to USD70M. In the blog, I pointed out how Alon Aginsky, CEO of cVidya, had claimed that the merger of cVidya and ECtel had created a business with combined revenues of USD50M. And yet, Hezi Zelevski, touting cVidya for yet another round of venture capital funding, has revealed:
…the 300-employee company is doing about $50 million in revenue and doesn’t need additional money for day to day operations. It does see opportunities to grow even more rapidly than its 20 percent internal rate by making additonal acquisitions.
Excuse me? They are doing about USD50M in revenue? That is a lot less than the USD60M-70M that Globes reported. It is also echoes the words of Alon Aginsky, who said he was running a USD50M business following the January 2010 merger with ECtel. My gut tells me the lower number is the one to be trusted. This is the number being pushed to potential investors. We can anticipate that they will get a slightly more accurate story than the rest of us.
Hezi Zelevski was quoted for a promo piece in TechJournal, ahead of cVidya’s attendance at the Southeast Venture Conference. If what he says is true (and I believe him) then USD50M revenues for 2011 compares to USD50M revenues for 2009 which leads to the conclusion that, overall, cVidya’s revenues have not grown over the last two years. However, the promo piece in TechJournal also said:
Since its acquisition of Ectel in January 2010, Cvidya has seen its revenues grow 25 percent and saw significant growth in its customer base in 2011.
Excuse me? Last week we were told, in many different places, that cVidya’s 2011 revenues were up 25% on their 2010 year end revenues. Here we are told they are up 25% since the merger with ECtel in January 2010.
There are only two possible ways that cVidya has experienced 25% growth in revenues. One possibility is that cVidya revenues fell by 20% in 2010, and then climbed again by 25% in 2011. Do the math: USD50M revenues for the 2009 year end falls to USD40M for 2010, which grows to USD50M for 2011. Overall that equates to zero growth. The other possible explanation would be that Alon Aginsky lied about the combined firm having USD50M revenues at the 2009 year end. At the time I speculated that the combined ECtel-cVidya revenues were likely to be around USD40M and that cVidya had exaggerated when stating they had the largest share of the market by revenues. If the 2009 year end revenues had been USD40M, that would fit with the TechJournal version that post-merger revenues had grown by 25% to a current level of USD50M. However, I think the former theory is more likely to be closer to the truth. At the end of 2010 cVidya said nothing about growth, which makes me think they kept quiet about a difficult year following the merger.
Whichever way you look at it, cVidya’s reports about its revenues are very suspicious… and not very impressive for a firm that sells ‘revenue intelligence’. Because there are so many contradictions, at least half of what we hear is untrue. How can I be so emphatic? I am just a simple risk manager, and risk managers do their work by gathering as much data as they can about uncertainties, in order to assess risk as best they can. But when the data is this contradictory, you cannot trust any of it.
After revealing how little we know about cVidya’s revenues and growth rates, what have we also learned about cVidya’s business strategy? That it is a mystery too! Globes suggested that Goldman Sachs may be screening potential buyers for cVidya. However, in TechJournal, Zelevski is quoted as saying that cVidya would use a new cash injection to make acquisitions. So right now, we have no idea if cVidya’s management team is trying to buy, sell, or maybe do both at the same time. If the combined cVidya-ECtel revenues fell by 20% in the year following merger, and they spent another year just getting back to where there were, then that is not a management team that should be encouraged to engage in more M&A. Do not forget that they obtained a huge cash pile from ECtel but seemingly they have used it all and now need more cash. Zelevski suggests the firm has broken even and they have fabulous rates of organic growth. Well, if the management team has discovered the knack of great organic growth, and have got costs under control, then why not let them prove their worth by showing current investors a repeat year of spectacular growth, culminating with profits for the first time ever? That way the company might actually fetch a decent price when put on sale. If they can maintain current growth rates, they will soon be number one in the market, beyond dispute. There is no need for cVidya to buy another loss-making company. With rivals in difficulties, cVidya would be better off picking up disgruntled customers without wasting money on buying an unwanted business. After all, they report impressive growth in the number of customers they serve. If you believe what cVidya’s management team says about their firm, then it makes no sense to give them money for M&A which will just bog down the business in a mess of integration for another year or more. And if you do not believe what cVidya’s management says about their firm, then why would you give them money?