Franklin Wireless Corp. (FKWL) research, news, and more from GeoInvesting

Company description

Wed, 30 Jul 2008 04:00:00 GMT

FRANKLIN WIRELESS CORP. designs and markets wireless broadband high speed data communication products such as 3rd generation wireless broadband modules and modems to end users and wireless companies in North and South American countries. Franklin focuses on wireless broadband USB modems, which provides a flexible way for wireless subscribers to connect to the wireless broadband network with any laptop, table PC or desktop USB port without a PC card slot. It markets its products through original equipment manufacturers and distributors, as well as directly to operators and end users in North and South America.

Research

Wed, 17 Feb 2021 16:46:12 GMT

Franklin Wireless (OOTC:FKWL) ($21.07, $243.1M market cap), a market leader in mobile broadband, announced Q2 2021 results:

Sales of $66.2 million vs $13.2 million in the prior year
EPS of $0.58 vs $0.05 in the prior year

"The continued record revenue and net income demonstrates the tireless work of our entire team to maximize opportunities during this challenging and difficult time for the global economy brought about by the Covid-19 global pandemic,” said OC Kim, president of Franklin Wireless. “Our manufacturing partners, suppliers and staff have done a great job overcoming supply chain delays and have consistently delivered our products on time, without increasing the cost of operations. It appears likely that the pandemic has caused long term changes to the way we work and learn, and these changes will increase demand for our wireless solutions for years to come. Operationally and financially, we are extremely well positioned to meet this demand for our products and solutions, with the strongest balance sheet in our history and a profitable business generating cash flow. We will keep working hard to take advantage of opportunities and deliver solutions to our customers to help them navigate these unprecedented times.”

Comments from management are more positive than cautious for the first time since we've been tracking the company.

Research

Tue, 17 Nov 2020 19:18:05 GMT

Franklin Wireless (OOTC:FKWL) ($21.00, $222.9M market cap), market leader in mobile broadband, announced Q1 2021 results via 10-Q only thus far:

Sales of $62.5 million vs $8.8 million in the prior year
EPS of $0.64 vs $0.02 in the prior year

We will await the company’s press release to see if they offer any color on how much of the sales in the quarter was a one time bump due to Covid-19. Per the Q:

“High volume sales to school districts rapidly rolling out remote learning programs was a significant driver for increased sales through our primary customers during the Covid-19 Pandemic period.

Research

Mon, 21 Sep 2020 12:56:11 GMT

Franklin Wireless Corporation (OOTC:FKWL) Issuance of Press Release A Sign Of Good Things to Come?

On February 4 2019, we provided a brief research update on Franklin Wireless Corporation (OOTC:FKWL)

On September 18, 2020 we highlighted FKWL’s strong 2020 Q4 results reported via a 10K filing:

Sales of $37.4 million vs $5.0 million in the prior year
EPS of $0.35 vs a loss of $0.07 in the prior year

For the year, sales increased 105.9% to $75.1 million, while EPS rose to $0.52 compared to a loss in 2019.

Well, after the market closed on Friday, FKWL issued a related press release.

Why is this significant?

As far as we can tell, this is the first press release the company has issued in seven months, maybe a sign that business momentum will continue into its fiscal 2021 year. As we have reported, FKWL is benefitting from:

- Schools – Sales to school districts as they adjust to remote learning programs, amid COVID-19
- New IoT product – New product recently launched called Pintrac geared to support consumer and enterprise solutions. “Pintrac is a cloud based IoT solution that is integrated with Franklin IoT devices and mobile applications to deliver a complete consumer experience.”

Telecom relationships – The company is well positioned to “meet demand for 5G technology and other networking solutions, with a loyal and growing customer base that includes two tier 1 U.S. carriers.”

From the 10K:

5G/4G LTE Wireless Broadband Products

5G/4G LTE Wi-Fi Mobile Hotspot – Portable Wi-Fi hotspot routers that provide wireless Internet access with 5G/4G support for multiple simultaneously connected devices including laptops, tablets, and smart phones. Our Mobile Hotspot products help remote workers be productive while on the go and help students and educational institutions support remote learning activities.

5G/4G LTE Consumer Home Gateway (Customer-Premises Equipment) –Enhanced routing gateway that can provide support for both wired and wireless connectivity, offering solutions for consumers looking to replace Cable or DSL service

IoT Tracking Devices and Connected Devices:

Smart IoT tracking device – Location service devices based on CAT1 and CAT M technology, allowing consumers and businesses to track virtually any tangible item, anytime and anywhere.

Connected Car – An all in one connected car solution that provides easy access Wi-Fi Hotspot technology and extensive added vehicle diagnostics, safety, and security features, as well as location service via OBDII protocol with other applications.

Home Phone Connect – Franklin’s Voice Over LTE (VoLTE) device provides a landline alternative connecting instantly and allows users local and domestic long distance calling through the carrier’s network.

IOT Server Platform and Application

Cloud based telecom grade server platform.

Pintrac Mobile Device Management (MDM) – for LTE hotspots allows schools, government agencies and to remotely manage and configure hotspots.

Pintrac Pet – a complete pet tracking application, allowing monitoring and tracking household pets and their activity using Franklin’s Trackers.

Pintrac Auto – tracks, locates, and manages vehicles for consumers and businesses using Franklin’s LTE OBD devices.

Our concern is that the press release and 10-K included some verbiage that could lead us to believe that the COVID-related bump in growth the company is experiencing is short-term and that its growth from its IoT business will be lumpy:

Press Release

“Our fiscal 2020 financial results reflect Franklin’s ability to capitalize on the surge in demand for wireless connectivity brought on by the Pandemic,” said OC Kim, president of Franklin Wireless. “We were able to expand production to meet unprecedented demand from school districts, large carriers and other partners for advanced networking and connectivity technology as the country shifted to a work-from-home reality amidst the global pandemic.”

10K

“The increase in net sales in the United States resulted primarily from increased demand for wireless connectivity due to people working and attending school remotely. High volume sales to school districts rapidly rolling out remote learning programs was a significant driver for increased sales through our primary customers during the Covid-19 Pandemic period.

Net sales also increased due to a newly launched product and the timing of orders placed by a new carrier customer, from which a significant portion of our revenue was derived.”

We have been attempting to secure an interview with management for several months. Maybe the fact that the company issued a press release is an indication that they will be more receptive to our request to speak with them.

Given the historical lumpiness and low gross margin (19.3%) of FKWL’s business, we do not think the stock is terribly cheap on a trailing twelve month basis:

Trailing Twelve Month (TTM) P/E: 27.4
TTM P/S: 2.2
TTM EV/S: 1.8

However, as we stated in our original research note, the company has added some products that could provide new growth avenues, specifically 5G and increased networking infrastructure demand.

Furthermore, the company has quickly built a fortress balance sheet with zero long-term debt and cash of $40 million, up from $11.8 million. (Please note that $6 Million of the increase in cash originated from a private placement completed in September).

Also, it looks like FKWL has an enormous amount of operating leverage, where operating expenses will not increase proportionately to increases in revenue. In fact, even as 2020 revenue increased 106%, operating expenses were flat:

If the company can come anywhere close to maintaining its 2020 Q4 EPS performance, we think the stock could continue to have legs, even after increasing 409% since our original research note.

We are obviously going to aggressively pursue a management interview.

Research

Fri, 18 Sep 2020 18:04:44 GMT

Franklin Wireless (OOTC:FKWL) ($13.50, $143.1M market cap), market leader in mobile broadband, reported its Q4 2020 results:

Sales of $37.4 million vs $5.0 million in the prior year
EPS of $0.35 vs a loss of $0.07 in the prior year

“Full year net sales in the United States increased by $38,622,391, or 106.6%, to $74,839,778 for the year ended June 30, 2020, from $36,217,387 for the corresponding period of 2019. The increase in net sales in the United States resulted primarily from increased demand for wireless connectivity due to people working and attending school remotely. High volume sales to school districts rapidly rolling out remote learning programs was a significant driver for increased sales through our primary customers during the Covid-19 Pandemic period. Net sales also increased due to a newly launched product and the timing of orders placed by a new carrier customer, from which a significant portion of our revenue was derived. (46% of our consolidated net sales for the year ended June 30, 2020).”

In our March 15 weekly wrap-up email, we mentioned FKWL was back on our radar after hitting new highs. In late July shares surged more than doubling in a few days and remain at elevated levels. Please note that the company recently completed a finance deal selling 923,078 shares at a price of $6.50. You can see our brief research note here.

Research

Tue, 19 May 2020 04:00:00 GMT

Franklin Wireless (OOTC:FKWL) ($5.52, $58.3M market cap), market leader in mobile broadband, announced Q3 2020 results via 10-Q on May 15, 2020:

Sales of $15.5 million vs $8.9 million in the prior year
EPS of $0.09 vs loss of $0.01 in the prior year

“The increase in net sales in the United States and Canada resulted primarily from increased demand for wireless connectivity due to people working and attending school remotely. Net sales also increased due to a newly launched product and the timing of orders placed by a new carrier customer, from which a significant portion of our revenue was derived (35% of our consolidated net sales for the three months ended March 31, 2020), as well as increased product demand (up 24%) from one major carrier customer compared to the corresponding period of 2019.”

In our March 15 weekly wrap-up email, we mentioned FKWL was back on our radar after hitting new highs. You can see our brief research note here

Comments & Business Outlook

Sun, 15 Mar 2020 04:00:00 GMT

Franklin Wireless Corporation (OOTC:FKWL) (Hardware/Software/IoT)

On February 4 2019, we provided a brief research update on FKWL, a company that manufactures hardware and software products that support smart tracking and the Internet of Things (IoT), as well as intelligent wireless broadband solutions including mobile hotspots, routers and modems. We mentioned that we wanted to monitor the company due to its collaboration with Qualcomm. However, we also noted that the company’s legacy products have been commoditized and that company’s financials have been terribly sporadic over the years. This remained to be the case in 2019.

Last week, we noticed that the stock hit a new 52 week high after meandering for the last several years. On the surface, it does not seem like the consistency of sales and earnings growth has changed at this time. But it’s worth noting that:

The company reported strong Q2 2020 sales and its second consecutive quarter of earnings growth
- Sales increased 44% to $13.3 million
- EPS Reached $0.05, reversing a prior year loss

However, the issue of sales lumpiness is still present

“The increase in net sales was primarily due to product development service revenue generated by FTI, which typically varies from period to period.”

5G and Internet of Things angle exists. Noting two press releases below:
- The company entered into partnership and joint venture with Partron Co. Ltd on worldwide 5G opportunities. Parton is an electronic component manufacturer out of Korean with over $1 billion in revenue. No terms or conditions were disclosed with regards to this relationship
- The company launched a new IoT product called Pintrac,

“…an all in one Internet of Things (IoT) platform, geared to support consumer and enterprise solutions. Pintrac is a cloud based IoT solution that is integrated with Franklin IoT devices and mobile applications to deliver a complete consumer experience.”

It’s also worth noting that these two press releases were the first since October 2018.

It might be a good time for us to interview management to determine if any of these recent developments are putting the company in a position to enter into a consistent mid to long-term growth cycle.

Research

Mon, 04 Feb 2019 15:16:44 GMT

We have been tracking Franklin Wireless (OOTC:FKWL) ($2.80, $29.6m market cap) for some time. The company provides intelligent wireless solutions. Its products include mobile hotspots, routers, and modems, as well as hardware and software products that support machine-to-machine, applications and the Internet of Things (IoT).

Like many microcap tech companies that sell commodity related products, FKWL’s financial history has been characterized by lumpy revenue performance, which is magnified by the uncertainty surrounding the timing of large product orders. 2018 was a not a good year for the company with revenues down 38% versus 2017.

In contrast to this poor comparison, the company managed a nice turnaround for its Q1 2019 vs. 2018 Q1 numbers, with sales of $13.3 million vs. $7.6 million, and EPS of $0.01 vs a loss of $0.04.

Given its history, we are obviously not treating this performance as a new trend. However, of particular interest is an October 26, 2018 press release detailing a collaboration with Qualcomm Incorporated (NASDAQ:QCOM) in pursuit of the wearable market:

"Franklin Wireless is delighted to announce our collaboration with Qualcomm Technologies, Inc. on our smart tracking solution. This collaboration enables smart tracking devices anywhere to utilize LTE broadband networks and enables the customer more efficient and comfortable ways to track their valuable assets”, stated OC Kim, president of Franklin Wireless.

What this development could mean remains to be seen, and the following statement by management will prompt us to look into FKWL’s opportunities a little more closely in the coming quarters:

“This next generation of tracking solutions use Qualcomm’s CAT1, CATM1 and NBIOT capabilities and makes users no longer reliant on limited Bluetooth or Wi-Fi connections. The Franklin Wireless Smart Tracker solution includes child, pet, asset, elderly as well as industrial tracking solutions and so forth.”

A quote from the QCOM release:

“Close working relationships announced today include:

Reference designs for LTE IoT based smart trackers: The smart tracking space is seeing increased growth as operators deploy Category M1 (eMTC) and NB-IOT networks. Qualcomm Technologies supports the smart tracking segment with focus on kids, pets, elderly, fitness, and valuables using its Snapdragon Wear 1100 and 1200 based platforms. The Company announced reference designs from Franklin Wireless, MeiG, Borqs and Arima.”

We’ll be releasing more coverage on several OTC companies with substantial revenue and profitability prospects later this week.

Comments & Business Outlook

Mon, 15 Oct 2012 04:00:00 GMT

FRANKLIN WIRELESS CORP.

Consolidated Statements of Operations

	Fiscal Years Ended June 30,
	2012			2011
Net sales	$	24,266,604		$	46,514,496
Cost of goods sold		19,038,346			32,170,247
Gross profit		5,228,258			14,344,249
Operating expenses:
Selling, general, and administrative and R&D		7,485,670			8,691,174
Total operating expenses		7,485,670			8,691,174
Income (loss) from operations		(2,257,412	)		5,653,075
Other income (loss), net:
Interest income		31,460			46,486
Gain on sale of property and equipment		–			212,303
Loss on disposal of property and equipment		(291	)		(140,283	)
Reimbursement of marketing fund for products previously purchased		–			1,581,457
Other income (loss), net		92,546			344,134
Total other income (loss), net		123,715			2,044,097
Net income (loss) before provision (benefit) for income taxes		(2,133,697	)		7,697,172
Income tax provision (benefit)		(1,213,791	)		3,353,795
Net income (loss)		(919,906	)		4,343,377
Non-controlling interests in net income of subsidiary at 49.4%		–			(207,739	)
Non-controlling interests in net loss of subsidiary at 48.5%		–			409,891
Non-controlling interests in net loss of subsidiary at 48.2%		790,932			–
Net income (loss) attributable to parent company	$	(128,974	)	$	4,545,529
Basic earnings (loss) per share attributable to parent company stockholders	$	(0.01	)	$	0.37
Diluted earnings (loss) per share attributable to parent company stockholders	$	(0.01	)	$	0.36
Weighted average common shares outstanding – basic		11,858,813			12,279,927
Weighted average common shares outstanding – diluted		11,858,813			12,463,585

Net salNet sales decreased by $22,247,892, or 47.8%, to $24,266,604 for the year ended June 30, 2012 from $46,514,496 for the corresponding period of 2011. For the year ended June 30, 2012, net sales by geographic regions, consisting of South America and the Caribbean, the United States, and Asia were $6,450,174 (26.6% of net sales), $13,851,066 (57.1% of net sales), and $3,965,364 (16.3% of net sales), respectively.

Net sales in the South American and Caribbean regions decreased by $4,893,347, or 43.1%, to $6,450,174 for the year ended June 30, 2012, from $11,343,521 for the corresponding period of 2011. The decrease was primarily due to the general nature of sales in these regions, which often fluctuate significantly from period to period due to by timing of orders placed by a relatively small number of customers. In addition, some carrier customers in these regions are transitioning from CDMA to LTE or HSPA+ networks, which affected the quantity of CDMA related products that were sold during the year ended June 30, 2012. Net sales in the United States decreased by $20,948,698, or 60.2%, to $13,851,066 for the year ended June 30, 2012, from $34,799,764 for the corresponding period of 2011. The decrease in net sales was due to several factors, including increased competition in the dual-mode (3G and 4G) USB modem market, as well as competition from other similar products, which negatively affected volume and price. Sales during the year ended June 30, 2012, were also affected by delays in launching new products. During the year ended June 30, 2012 the Company was developing new products that are expected to be released during the first half of fiscal 2013. Net sales in Asia increased by $3,593,953, or 968.2%, to $3,965,164 for the year ended June 30, 2012, from $371,211 for the corresponding period of 2011. The increase in net sales was primarily due to the addition of a new customer in this region which purchased production quantities of the Company’s M600 dual-mode (3G and 4G) embedded modules as well as other product and component sales generated by FTI. es decreased by $55,383,623, or 54.4%, to $46,514,496 for the year ended June 30, 2011 from $101,898,119 for the corresponding period of 2010.

GeoTeam® Note: Fourth 2012 vs. 2011

Sales: $15.7 vs. $4.90

EPS: $0.12 vs. loss of $0.01

Also note that due to the introduction of new products the next two quarters could also see strong financial results. Keep in mind that historically, financial results have been quite volatile and the company has thin margins.

Comments & Business Outlook

Tue, 15 Feb 2011 05:00:00 GMT

For the second quarter of 20111, the company reported:

Net sales of $15.6 million for the quarter, compared with $25.2 million in net sales for the corresponding period of 2009.
Despite the decrease in revenue, gross profit increased by 110% to $6.1 million compared to $2.9 million for the same quarter last year.
In addition, net income increased to $2.0 million for the three month period ending December 31, 2010, compared with $821,546 for the same period in 2009, which represents a 147% increase year-over-year.

"Despite operating in a very competitive environment during this past quarter, Franklin Wireless posted solid financial results including substantial increases in gross margin and net income," said OC Kim, president of Franklin Wireless. "During the quarter, we continued to ship a greater mix of FTI supplied products, which was the primary reason for the improved results and we feel this further validates our strategic investment in FTI which took place in fiscal 2010."

Diluted earnings per share improved to $0.17 for the quarter compared to $0.06 for same period last year.

The increase was due to higher net income as well as the lower share count resulting from the recent repurchase of approximately 1.8 million shares from C-Motech. The Company expects to repurchase C-Motech's remaining 1.6 million shares by March 31, 2011, which will further reduce the number of shares outstanding.

Research

Tue, 07 Sep 2010 04:00:00 GMT

Franklin Wireless issued a release this morning:

"Based upon the company's preliminary estimates, total revenue is expected to be approximately $100 million for the full 2010 fiscal year, which represents more than a 300% increase over the fiscal 2009 period. In addition, the company announced that it was profitable in each quarter of the 2010 fiscal year."

This guidance implies fourth quarter revenues of about $40.0 million which compares to $9.8 million reported in FKWL fiscal 2009 comparable period. However, reading between the lines one may surmise that fourth quarter EPS growth may not be in the cards since the company only commented that it would be profitable. Weakened margins in lieu of increasing sales has been the the one sticky issue this year. Investors will likely require more clarity on EPS growth going forward. We will provide an update upon the release of year end results.

GeoSpecial Notes

Tue, 03 Aug 2010 04:00:00 GMT

Added to the GeoSpecial list on February 17, 2010 @ $1.90

Catalyst: anticipation of a dramatic revenue break out.

Peak performance: Reached a high of $2.50 on 4/7/09.
Current road block: Margin pressure; No financial guidance.
Current Price: $2.00

While revenues have exploded due to an overall increase in demand for the Company's dual-mode (3G and 4G) wireless USB modems...

Fiscal 2nd.quarter sales; 2010 vs 2009: $25.18 vs. $4.62 million
Fiscal 3rd. quarter sales; 2010 vs 2009: $31.63 vs. $3.31 million
Fiscal 2nd.quarter EPS; 2010 vs 2009: $0.06 vs. $0.04
Fiscal 3rd. quarter EPS; 2010 vs 2009: $0.10 vs. $0.00

The company has experienced a significant reduction in margins:

"The gross profit decrease in terms of net sales percentage was primarily due to the significant increase in sales to carrier customers in the United States, whose gross profit in terms of net sales percentage was 13.4% and accounted for 99.1% of total net sales for the three months ended March 31, 2010. The decrease in sales in the South America and Caribbean regions also negatively affected the gross profit in terms of net sales percentage."

Investing in Franklin Wireless in the short-term is a challenging call for us. FKWL is going up against a tough Fiscal 2009 fourth quarter where it reported EPS $0.18. Without any guidance or an interview, we are inclined to wait and see where fourth quarter numbers come in at before making an additional commitment to FKWL shares.

Note:

Today's announcement that FKWL has reached an agreement with C-Motech Co. Ltd. to repurchase all of C-Motech's Franklin Wireless shares should help EPS.

"The company will complete the repurchase of the shares by December 31, 2010. C-Motech currently holds 3,370,356 shares of Franklin's common stock, which represent approximately 24% of Franklin's outstanding shares."