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Adding Edgewater Wireless Systems to our Watch List as a high-density Wi-Fi and Internet
of Things (IoT) opportunity: We are adding Edgewater Wireless Systems to our Watch List.
All figures are in C$ unless otherwise noted.
IoT Leads to Wireless Congestion: As the proliferation of smartphones and wireless devices
continues to grow, rates of data and video usage are also growing at an exponential rate.
This causes significant Quality of Service (QoS) issues as the result of increased bandwidth
usage and interference caused by multiple access points (APs) functioning within a
condensed geographic area. YFI is positioned to address these current and future
performance issues as well as offer differentiated Wi-Fi products to allow carriers and service
providers the ability to deliver diverse revenue generating applications and services.
WiFi3 Serves a Big Market: Verticals where YFIs solution would make a meaningful impact
are the $500B cable industry, $5.4B enterprise Wi-Fi market, $3.0B stadium/concert/public
space market, condo/high-rise market, and retail market. Of the latter, Edgewater has
publicly stated that it is engaged with a top 5 retailer.
IP Secured: WiFi3 works by splitting the 2.4GHz (or 5GHz) channel into three separate
channels, and routing information intelligently across these three separate channels. This
means that devices will compete less for bandwidth. And if necessary, WiFi3 is capable of
splitting each of those three channels into four more, creating 12 open pathways or lanes
for data. The Companys routers can work together to form mesh networks, each working
on different channels to avoid interference and creating a stronger overall network, solving
the interference problem as well. It has products designed for both indoor and outdoor
environments.
Milestones Achieved: YFI holds a rich patent portfolio of over 20 patents and has received
regulatory approvals in Canada, the US, EU, and Brazil.
Upcoming Catalysts: (1) Conversion of pilots into announced contracts; (2) Global OEM
design wins; (3) IP licensing deals; and (4) Commenced US listing process on OTCQB.
Exhibit 1 The Next Generation of Wi-Fi Infrastructure (WiFi3)
Company Overview
Edgewater Wireless is based in Ottawa, Ontario, and is developing and commercialising technologies and intellectual
property for the wireless communications markets. Its flagship product lines are high-performance silicon solutions,
known as WiFi3, and a family of multi-channel Wi-Fi access points, which target high-density Wi-Fi applications in the
telecommunications, cable multiple system operator (MSO), large enterprise, and IoT markets. The market for Wi-Fi
has evolved and WiFi3 was designed to solve the triple threat to Wi-Fi interference, capacity, and density, which
are crushing Wi-Fi performance worldwide.
Technology Solutions
Edgewater Wireless WiFi3 powered access point technology can support an array of features that can be achieved
with its next-gen WiFi3 infrastructure, including:
1. Multi-channel radio architecture Offers up to three concurrent channels per radio, mitigating co-channel
interference;
2. Spectral Surveillance Architecture (SSA) (real-time, integrated spectral surveillance architecture) dramatically
lowers operational expense plus adds security;
3. Intelligence Channel Association (ICA) enables the operator to configure each channel to support different media,
i.e., voice video, data, or different levels of QoS, security, and output performance;
4. Load Balancing Enables the operator to offload heavily loaded channels to other channels. It offers integrated
dynamic load balancing across multi-channel radio architecture to deliver the highest QoS to the most users on
the network;
5. PowerZoning With independent transmit power control per channel, access points (APs) can be configured to
minimize inter-AP interference for APs that are deployed in proximity without compromising overall network
performance. It maximizes frequency planning and reuse to deliver a high performance, high QoS end user
experience with the highest channel density available.
YFIs competitors products rely on essentially the same single channel wireless radio chip to run their access point
products. As the proliferation of smartphones and wireless devices continues to grow, rates of data and video usage
are also growing at an exponential rate. This causes significant QoS issues as the result of increased bandwidth usage
and interference caused by multiple access points functioning within a condensed geographic scope. YFI is positioned
to address these current and future performance issues as well as offer differentiated Wi-Fi products to allow carriers
and service providers the ability to deliver diverse revenue generating applications and services.
As more and more devices are connected to the IoT, data tends to overwhelm networks and create signal
transmission issues. Standard Wi-Fi provides service to every device on a network through a single channel on the
2.4GHz or 5.0GHz wireless bands, and typically only one device at a time. When you have a network with many
devices connected to the internet competing for data, quality of service weakens and it is common to have the signal
cut in and out (think of public Wi-Fi at an airport).
Wi-Fi3 works by splitting the 2.4GHz (or 5.0GHz) channel into three separate channels, and routing information
intelligently across these three separate channels. This means that devices will compete less for bandwidth. And if
necessary, WiFi3 is capable of splitting each of those three channels into four more, creating 12 open pathways or
lanes for data. The Company says that its routers can work together to form mesh networks, each working on
different channels to avoid interference and create a stronger overall network, solving the interference problem as
well. It has products designed for both indoor and outdoor environments.
Source: Edgewater
Edgewater Wireless high density and capacity Wi-Fi routers and solutions integrated with WiFi3 deliver next-
generation performance. This combination meets the accelerating demand for cost effective, reliable and robust data
networking in one of the fastest growing industries in the world Wireless Communications. Over $60M has been
invested in the technological development of WiFi3.
Source: Edgewater
WiFI3
WiFI3 is patented wireless technology specifically developed to solve interference, capacity, and density problems.
Simply put, there are two ways to do Wi-Fi:
1. One radio, one channel = slow Wi-Fi;
Multi-channel Single Radio (MCSR) Wi-Fi uses the same Wi-Fi standard with a patented and modern approach delivering
more channels per radio. YFI holds a rich patent portfolio applicable across multiple wireless standards including 801.11
standard (AH, AX, etc.).
Source: Edgewater
Market Opportunity
Markets and Markets estimates the global Wi-Fi market to be worth $33B, driven by the rapid proliferation of high
data, high-density demand devices such as smartphones, tablets, laptops, and watches. Global Web Index reports
that the average North American user has over 3.64 Wi-Fi enabled devices this is putting pressure on telcos, cable
operators, enterprises, and stadiums/conference centres to deliver a Wi-Fi service capable of supporting features
such as Voice over Internet Protocol (VoIP), HD video and data rich applications such as Facebook, Snapchat,
WhatsApp, YouTube, and others.
Recent industry consolidation includes the acquisition of Aruba Networks (Private) by HP (HPE-US, NR) and the re-
acquisition of Ruckus Wireless (Private) by Arris International (ARRS-US, NR). Should YFI successfully prove out its
technology in field, it would be an ideal take-out candidate for one of the larger infrastructure vendors.
A broader view of Wi-Fi traffic, inclusive of traffic from Wi-Fi-only devices, shows that Wi-Fi and mobile are both
growing faster than fixed traffic (devices connected to the network through Ethernet). Cisco (CSCO-US, NR) estimates
that fixed traffic will fall from 52% of total IP traffic in 2015 to 33% by 2020, with mobile and offload from mobile
devices together accounting for 47% of total IP traffic by 2020, a testament to the significant growth and impact of
mobile devices and lifestyles on overall traffic. Cisco believes Wi-Fi traffic from both mobile devices and Wi-Fi-only
devices together will account for almost 49% of total IP traffic by 2020, up from 42% in 2015. The increased traffic and
demand for reliable Wi-Fi adds strenuous pressure on bandwidth a quandary to which YFI has an innovative answer.
Source: Cisco
Besides mainstream mobile devices, billions of IoT connections will be added over next five years. These connections
are predominantly either on Wi-Fi and/or on cellular networks. If a small selection of popular IoT devices and their
consumption in Megabytes per hour were on the mobile network and on a 5GB data cap, Exhibit 7 shows the number
of hours of consumption these IoT connections would take to fill the data cap. There are immense implications on the
network design and readiness for the slew of IoT devices coming on to the network, be it Wi-Fi or mobile. Mobile data
plans will need to evolve to accommodate the large mix and types of connections for end consumers and subscribers,
and Wi-Fi will have to adapt to the bandwidth requirements and adaptation of increased competition thereof.
Source: Cisco
Three-Pronged Attack
Edgewaters path to revenue lies in its three business units, HD Wi-Fi Solutions, OEM & Licensing, and Patent
Monetization.
Patent Monetization
Patent portfolio with >20 patents
Patents applicable across numerous
wireless technologies first IP licensing
customer is Apple (AAPL-US, NR)
Source: Edgewater
CableLabs
In July 2016, YFI made a strategic decision to engage with CableLabs and enter its accelerator program, UpRamp
Fiterator. CableLabs is a non-profit innovation and R&D lab founded by members of the $500B cable television
industry and tasked with driving innovation in industry. Companies such as Rogers (RCI .B-T, $64.87, Buy, $73.00
PT), Shaw (SJR.B-T, $29.39, Buy, $32.00 PT) and Comcast (CMCSA-US, NR) are a sample of those in the CableLabs
network all of which understand the shortcomings of traditional Wi-Fi.
In just 12 months, YFI is growing its list of engagements, which currently stands at eight and ranging from tier one
operators to smaller regional tier three MSOs.
CableLabs has allowed YFI to access many key relationships and has led to capturing the attention of the fifth largest
cableco, Mediacom, and also secured a pilot at a name-brand NYC venue as YFIs technology is validated in the
market.
Volume (M)
i ndoor a nd outdoor a cces s poi nts (APs ). The compa ny wa s founded on Ja nua ry Hi gh: #N/A #N/A
Price (C$)
Financial Summary/Key Metrics 2016 2017 Q118 Q218E Q318E Q418E 2018E 2019E 2020E 2021E Top Inst. Ownership % Held
Total Revenue 0.1 0.3 0.0 0.1 0.2 0.5 0.9 6.1 12.2 20.8 #N/A #N/A
Growth y/y 104% 1167% 100% 157% 284% 219% 601% 100% 70%
Consensus
Gross Margin 58.2% 26.2% 2.3% 15.0% 15.0% 15.0% 14.6% 25.0% 35.0% 45.0%
EBITDA (1.7) (3.6) (0.8) (0.9) (1.0) (1.3) (4.1) (3.3) (0.8) 4.2
Growth y/y 107% 40% 5% 31% -1% 14.2% -19.7% -75.6% -618.3%
Consensus
Diluted EPS (0.02) (0.03) (0.01) (0.01) (0.01) (0.01) (0.03) (0.02) (0.01) 0.03
Growth y/y 75% 14% -21% 18% -12% -4.4% -20.6% -76.8% -577.8%
Consensus
Net Debt (0.1) 0.4 (0.2) 0.1 (0.8) 0.5 0.5 4.9 6.3 2.2 Key Statistics Value
Capex 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 52 Wk Hi gh 0.84
52 Wk Low 0.19
YTD Chg. 132%
Balance Sheet 2017 Q118 Q218E Q318E Q418E 2018E 2019E 2020E 2021E 1 Yr. Chg. 172%
Cash 0.1 0.5 0.2 1.1 - 0.2 - 0.2 - 4.7 - 6.1 - 2.0 Beta 0.59
Trade & Other Receivables 0.4 0.3 0.3 0.7 1.7 1.7 1.8 3.5 6.0 Ma rket Ca p 99
Total Current Assets 0.7 1.1 0.8 2.3 2.6 2.6 - 0.2 2.0 10.6 EV 94
Sha res Outs ta ndi ng (M) 143
Total Assets 1.0 1.2 0.9 2.4 2.7 2.7 - 0.0 2.2 10.8 LTM Di vi dend -
Di vi dend Yi el d 0.0%
Deferred Revenue - - - - - - - - -
Trade & Other Payables 1.4 1.2 1.8 2.1 3.3 3.3 2.7 3.3 4.1 Valuation 2017 2018E
Total Current Liabilities 1.7 1.4 1.9 2.3 3.4 3.4 2.8 3.4 4.2 EV/Rev 345.5 108.4
Total Liabilities 1.8 1.5 2.1 2.4 3.5 3.5 2.9 3.5 4.2 EV/EBITDA (26.1) (22.9)
Total Liabilities & Shareholders Equity 1.0 1.2 0.9 2.4 2.7 2.7 - 0.0 2.2 10.8 P/E (21.3) (22.3)
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ANALYST CERTIFICATION
Company: Edgewater Wireless Systems Inc. | YFI:TSXV
I, Ralph Garcea, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not,
and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.
IMPORTANT DISCLOSURES
Does the Analyst or any member of the Analysts household have a financial interest in the securities of the subject issuer?
No
If Yes: 1) Is it a long or short position? No; and, 2) What type of security is it? None
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Does Echelon Wealth Partners Inc. or the Analyst have any actual material conflicts of interest with the issuer? No
Does Echelon Wealth Partners Inc. and/or one or more entities affiliated with Echelon Wealth Partners Inc. beneficially own common shares (or any other class of
No
common equity securities) of this issuer which constitutes more than 1% of the presently issued and outstanding shares of the issuer?
During the last 12 months, has Echelon Wealth Partners Inc. provided financial advice to and/or, either on its own or as a syndicate member, participated in a public
No
offering, or private placement of securities of this issuer?
During the last 12 months, has Echelon Wealth Partners Inc. received compensation for having provided investment banking or related services to this Issuer? No
Has the Analyst had an onsite visit with the Issuer within the last 12 months? No
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RATING DEFINITIONS
The security represents attractive relative value and is expected to appreciate significantly from the current price over the next 12 month time
Buy
horizon.
Speculative Buy The security is considered a BUY but in the analysts opinion possesses certain operational and/or financial risks that are higher than average.
Hold The security represents fair value and no material appreciation is expected over the next 12-18 month time horizon.
Sell The security represents poor value and is expected to depreciate over the next 12 month time horizon.
While not a rating, this designates the existing rating and/or forecasts are subject to specific review usually due to a material event or share price
Under Review
move.
Tender Echelon Wealth Partners recommends that investors tender to an existing public offer for the securities in the absence of a superior competing offer.
Dropped Applies to former coverage names where a current analyst has dropped coverage. Echelon Wealth Partners will provide notice to investors whenever
Coverage coverage of an issuer is dropped.
RATINGS DISTRIBUTION
Recommendation Hierarchy Buy Speculative Buy Hold Sell Under Review Restricted Tender
Number of recommendations 47 46 16 1 2 4 0
% of Total (excluding Restricted) 42% 41% 14% 1% 2%
Number of investment banking relationships 7 20 2 1 0 4 0
% of Total (excluding Restricted) 23% 67% 7% 3% 0%
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