Q1 2021 MICT Inc Earnings Call
Ladies and gentlemen, thank you for standing by good morning, and welcome to the Mic's. The first quarter 2021 financial results and corporate update conference call.
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I would now like to turn the conference call over to Scott Gordon President of core IR, the company's Investor relations firm.
Sir Please go ahead.
Thank you Jamie.
Good morning, everyone and thank you for joining us for the <unk> first quarter 2021 financial results and corporate update conference call joining us today from M ICT or Darren Mercer, Chief Executive Officer of MCT, and Moran Omron controller for M. ICT.
During this call management will be making forward looking statements, including statements that address the mic's EPS expectations for future performance or operational results.
Forward looking statements involve risks and other factors that may cause actual results to differ materially from those statements for more information about these risks. Please refer to the risk factors described in the <unk>. Most recently filed periodic reports on form 10-K and form 10-Q.
On form 8-K filed with the SEC today, and then Ict's press release that accompanies this call, particularly precautionary statements isn't it the content of this call contains time sensitive information that is accurate only as of today may 24th 2021, except as required by law.
<unk> disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur. After this call. It is now my pleasure to turn the call over to Darren Mercer Chief Executive officer of that might be too Darren. Please go ahead.
Thank you Scott good morning, and thank you all for joining us on the call and on the webcast today.
If we can tons of the presentation. Please go straight to slide 3.
Yeah.
It's been a strong quarter for the company and we have achieved a great deal in a very short amount of time.
In terms of licensees, we achieve regulatory approval from the Hong Kong SFC.
The enabled us to initiate trading on I will stop trading out which is in the late phase of testing.
We acquired the Chinese nationwide broker license in the insurance space, which will facilitate rapid growth in our insurance business in China.
The acquisition of enables us to offer the BTC product direct to customers.
Tables of to move into higher margin insurance products on the building of our database. Each month provides a strong foundation for us to become the beats the scene play out.
In the second quarter, we expect the launch all b to B to C platforms, and we expect this to third the perform in terms of volume on margin.
From a technological standpoint, we have also made remarkable progress as I just indicated we launched our <unk> insurance platform. During this quarter on we have moved all stopped trading platform into the final stages of testing with the expectation that we anticipate the soft launch in late June with the larger rollout so kind of in July.
We've also begun the developments, while commodity trading platform and will further provide.
The other updates on that as they become available.
We're in great shape in terms of license is great progress in all of technology on all fund raising over the course of the quarter is create to the balance sheet that enables us to create an extremely strong guidance.
The platform in 1 of the fastest growing economic regions in the world.
Finally, we have very strong management teams in each of observations on they are executing extremely well and we're very excited about Q2 and beyond.
If we can sense of the next slide please.
Oh, what a difference of yeah makes this time last year of the company had a very small market cap on only $3 million in cash.
We're also of minority shareholder in micro net which was underperforming in the underwhelming in the market.
Well Ross joined this corresponding quarter of 2021 micro net of which we are now the majority shareholder is showing great signs of growth and productivity, having signed T orders of dovetail on the certification to connect with the global T Mobile network.
Most importantly, all moved to the Fintech space is paying off.
Our insurance business is performing well, having gone at over $8 million in insurance revenue during the quarter the.
The stock trading platform is about to come on line along with the development of all commodity trading business and we are sitting on significant cash and all of their support and develop each of our business lines.
The next slide please.
The Q1 acquisition of the nationwide license in China is the key drivers of the growth of that business.
It has allowed us to launch on <unk> platform, which has been well received and performed extremely well during the first quarter, which we expect will continue into the second and beyond.
But it also allows us to grow that business beyond the need for a business to business sales path, enabling us to offer a wider range of products with better margins increased sales as we prepare to launch I'll beat the C platform in the second quarter on.
The increased profits as we begin to concentrate our efforts into the more lucrative spaces of health and <unk>.
Life insurance.
And if we can move to the next slide please.
We believe that we have 3 very strong competitive advantages in our emerging stock trading business and believe we will prove from.
Horrible for the leaders in the sector.
In our opinion the case of being competitive in this area licensed 3 cornerstones of drive success from the Chinese and South East Asia market.
The first is the regulatory approval from the Hong Kong SFC.
Remember the Hong Kong SFC is regarded as 1 of the premier exchanges in the world on to receive of license direct from that body helps us to build confidence and trust between the provider on the customer which is an important driver of customer acquisition.
So the the direct license eliminates the ladies and trades on the third party licensees often experience.
Next is proprietary software that provides flexibility of product developments.
Many of our competitors white label other companies' platforms, which ultimately reduces margins.
Having developed our own software.
We are in the position to offer flexible pricing whilst maximizing margins.
Potently the use of our own proprietary software allows us to maintain on 1 of our own database, which means we have on all of our data and thereby do not have to share with the platform provider.
Key driver, we believe of shareholder value.
We also believe that the final key to success is a strong balance sheet to support margin finance.
On the Hong Kong SFC rules provide us condone the language 5 times the balance sheet to provide margin for underlying customers.
Go with the launch of the balance sheet, the more margin finance as possible.
Margin financing is extremely profitable for companies in this marketplace.
And with our cash reserves of $123 million, we not only have incredible flexibility for margin finance, but because we all leverage leveraging all of our own platform rather than the white label provider on margin as much.
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Thank you for your patience everyone on the Speaker line of has rejoined.
Okay. Thank you everybody apologies.
Technical glitch there.
When I left my presentation, we were about to start.
Slide 7 perhaps we can.
Got it.
Turning to the slide.
Our commodity trading business, which rounds out of Fintech offering in China, and Southeast Asia will provide all customers with the complete suite of financial products.
Our relationship with Shanghai Petroleum and natural gas trading center. These customers account for approximately 20% of China's oil and gas trading will provide us with the easier access the commodity traders operating as a strategic third party partner to the exchanges clients to provide trade execution margin financing on trade.
And the capabilities.
Looking at the key partner with some of China's largest commodity exchanges affords us the opportunity to make major in roads in this multi hundred billion dollar market place.
All hopeful to generate meaningful sales and commission revenue to our platform early in the second half of 2021.
I'd like now to take the moment to discuss the micro net business, which has had some impressive successes over the course of the first quarter, perhaps from concern to the next slide please.
While micro net coal business. He is now in all of Fintech offerings are investments and Mike net has shown promise during the quarter.
First we reported the fourth quarter 2020 order for the small kind of products.
$300000 on during the first quarter of 2021, we saw additional traction with the significant follow on order from 1.1 of the world's largest telematics service providers will 5000 small common units valued at $1.5 million with the recent additional order for an additional $900000.
But perhaps most important for the company with the certification to operate these technology on the global T Mobile network.
This is the first global certification the micro net is achieved.
Look forward to similar opportunities with other providers, which we believe will be of key to continued execution on growth for that subsidiary.
I would like now to turn on the Colo, but similar on Brian for financial review of the quarter.
Yeah.
Thank you Dan revenue on the third quarter was $8.9 million going on.
And the ear.
The increase from Q1 was the result of.
Your line is the vision.
And ladies and gentlemen go ahead of budget in Q1 with $1.9 million dollar the J D.
In the year ago period.
R&D expense in Q1 with 231000 going on.
And the Ergo PV.
Selling and marketing expense from Q1 was $1 million zero in the first quarter of Glen quick link.
General and administrative expense.
The $6 million.
$770000 in the period.
Your E&P the.
The operating loss in Q1 with $4.8 million in Buena Vista of slots.
Lots of $770000 in the Pea.
P.
Net loss at the beauty to MSP in the first quarter were slow up on fragmented into airlines.
The city lots of 1.6 million in the period of E&P.
Greece, and the operating loss the net loss.
What day, regardless of iron.
<unk> expense.
We the company launch into the China clean Tech market.
Victor you the Dan.
Yes.
Okay.
Thank you.
Thank you Lauren.
Okay.
So I hope you can clearly see.
<unk> is well positioned to see significant impact from the emerging Chinese fintech market.
Our insurance business has just begun.
We are already seeing significant revenue and they expect to see this increase as we expand from our original <unk> services and the expand our reach directly toward the insurance customer themselves through the emerging b to b to C and b to C offerings.
We are poised to launch of well planned inhibiting stop trading platform driven by of targeted marketing strategy on our already significant investments in all of software development.
Acquisition of <unk> into a highly experienced management team.
We also expect to launch on commodities and futures trading platform. Shortly thereafter, which is supported through our unique relationship with the major focus of the Chinese oil and gas industry.
We have an extremely strong balance sheet for the $123 million in cash, which will enable us to execute on our growth strategy, providing both the insurance division on the stock trading division significant resources to support that current respective growth plans and the support margin trading the results in large appropriate opportunity.
Yes.
We are just getting started on we could not be more excited about the future of MCT.
We thank you for your continued support and we look forward to sharing our progress with you as it develops.
I'll now turn the call back over to Scott Gordon for our Q&A session.
Thank you Darren the company received many questions from investors for today's call and we thank you for your interest feedback and continued support of shareholders. Many of these questions were repetitive and so on today's call. We will be addressing the most frequently asked questions. Additionally, the company has received a number of questions that are seeking them.
From an H information about things not disclosed by the company or are forward looking as well as the number of questions regarding share price fluctuations on the trading activities of the chairs as a matter of policy and regulatory compliance. The company does not offer interim operational or financial update forward looking guidance or capital market.
<unk> for comments on the performance of its shares in the market with that the first question is for what reason did.
Did you do the recent fund raising on how do you believe it was in the shareholders' interest.
Thank you.
I think the short answer to that the growth capital.
The more long winded answer.
I think we have to really look at what we create the does the business and battery mine the enormity of the opportunities we've created and not just 1 but <unk> the fintech markets within China and Southeast Asia on the.
How did you consider our cash requirements.
If we look at the Fintech business as our insurance business is already growing the pace and benefit on benefit.
Benefiting from access to additional working capital growth capital to fuel additional growth.
These required additionally, we needed with the stock trading platform.
We secured 1 of the most highly boutique financial service licenses in China and Hong Kong.
Now have the opportunity to launch on compete with all Payors in what is a very exciting.
Clearly south.
As I mentioned in the slide presentation margin financing can be critical without drive on.
This fundraise enables on.
Empowers us to be able to swap of the answer while underlying clients and as we also said that itself is going to be a huge contributor we believe to the profitability of that deviation.
On the closer of the commodity trading all Blue chip clients will also require leveraging facility and so again. This will also we believe the very lucrative area for us.
I guess by raising the capital that we have we can focus on the growth of all of our <unk> III from type businesses, rather than having to choose 1 on install of 1 or more of the.
The needed growth capital.
Thank you Darren.
The next question what is the company's current cash burn where the funds raised to accommodate that burn and do you anticipate that burn changing in the near future.
Yeah.
Lots of good question.
As I've just said in the previous answer the.
The cash was not raised the cash burn the cash with rates of growth capital on these types of if you look at what our cash position was at the end of Q4.
2020, we had around $20 million of cash in the bank.
And since then we've raised a further 114, which when you take cost out comes down to around.
The 104.
So.
Bearing in mind that we've also completed 2 acquisitions during the quarter, we funded research and development pre launch costs and so on and so forth you can see the op cash burn is actually where all the small.
Yeah.
As I said in the previous answer all funds of primarily the growth capital to enable a swap of the legwork leveraging facilities.
2 our underlying clients.
Thank you what was the operating profit or loss of the insurance business for Q1, and do you expect it to deliver profit in Q2 and beyond.
Yeah.
Okay.
First of all I think I should say that I'm not allowed to give forward looking statements. So im not really on the comments on when we believe this will become profitable on Dol.
But what I can say.
Is that the the loss of that division was around $300000.
And as I've said in the announcements today that business is continuing to grow on continuing to please us very very much.
And you.
Not particularly as you move towards the <unk> products with much higher margin they will clearly contribute more gross profit.
I think last year I'm committed to answer that question.
Thank you.
Or are you so confident that your stock trading app will be able to compete on the likes of <unk>.
And the <unk> fintech.
Okay. So I think 2 things I should say so too is the darling of the industry the $20 billion market cap company. The some stock trading a new piece of the known as Tiger for those of you who don't know by.
The official bank.
On a sort of really good question.
So.
I think of couple of things.
We said in the presentation. There are really 3 main components of what we think will be will provide.
Basis gross successful stock trading business.
And interestingly before of carry on a lot of this was touched upon in Q2s results presentation last week on those 3 areas really are.
Thus the regulatory.
And as I said in the presentation.
On the importance of the Hong Kong license is the comfort and security it gives to the underlying user in southeast Asia without doubt Hong Kong is we call. It as the premiere of the stock exchange market prices on.
When your customers are giving you large amounts of that money in trading large amounts of money with you is important the they feel them on the east protected on that Hong Kong licensees critical.
<unk> has the Hong Kong license <unk> Fintech Hasnt got 1 of the products I think of licenses in New Zealand on you have to ask them why that's the case.
But really gives us a significant advantage from customer acquisition.
Secondly, I think it's important to have an innovative on the robust technology your own proprietary <unk> platform.
So many different reasons on again. This contrast, with many of those in the marketplace due to the housing simple price of oil.
Our platform people like Tiger Hot use interactive brokers.
We think lots of weakness and we think the benefits of our own platform really all of that because of firstly.
We can have the flexibility to create the products that we believe will best suits all customers from changes as of when we believe the need arises from you don't get out of few white label the product.
Secondly, we don't know.
Youll proprietary of platform.
Keep hold of the margin, you'll some of you're not going to get away to a third party provider on I think the often forgotten 1 is the importance of data as I've said in the presentation of moments ago.
The minute you start sharing all of the information about your underlying client review of third party provider you lose control of that data.
On data, we think is going to be very important not just in this business, but throughout the group through the insurance through the commodity trading business.
On our ability to cross pollinate abuse. The data, we think is going to help drive significant shareholder value.
The third area on this goes back to the fund raises of why we did this in the 1 of the main reasons, we did it in the first place.
Having a great up is 1 thing.
<unk> licenses and other but if you cannot provide the full range of services to your underlying customers and what is the competitive landscape you couldnt find it very hard to make the progress that you hope or wish for.
With that fund raise with the $123 million on the balance sheet, we now have that ability to off the significant margin finance book.
1 of the things we need to remember these are being regulated from strictly regulated in the premium market in Hong Kong.
We can only ourselves leverage 5 times the level of cash on the balance sheet and so clearly the more cash we have the more we can leverage and as I've said several times today, it's going to be a very important profitable part of the business.
Thank you.
When do you expect the stock trading App to launch and what can you tell us about the launch plan.
Yes.
Okay. I think we said earlier today that we are launching.
There'll be a soft launch at the end of June with the full rollout in July.
For the exciting plans, we have got I'd, rather keep our powder dry of no share them of my competitors, if that's all right.
But what I will say the very excited by the products you sell.
We're excited we're very excited about the developments, we've made and we're very excited about the launch that somewhere about sort of bulk of them.
Thank you what services are you planning to provide with regards to commodity trading in futures and do you plan to expand to other commodity after of oil and gas.
Okay.
In terms of.
How we service the trading sensitive clients, which include some of China's largest oil and gas companies like sinopec, which on oil and gas as well as many government departments and bureaus state owned companies large corporations will provide execution services very similar to what we do in stock trading.
On what we do is we access the leading commodity exchanges wondering shandong on the futures exchange in volume.
In return for commissions on those trades on fees should we provide margin items.
That's something we're very open to because again the in this market is also very profitable on the underlying client share of very blue chip Indeed.
I'll be looking at other areas.
Yes, we all but I really cant disclose moving but at the stage Needless to say Chinese China's commodity market saw on.
Of our months of the largest in the world.
Yeah.
Thank you can you tell us a little bit more about your financial performance regarding non-GAAP loss from Q1.2021 after stripping out.
The 1 off cost and adding back the micro net losses.
Okay.
My calculation.
The non-GAAP loss of after adjustments.
From the size Asian of intangible assets and expenses related to settlements agreements was $3.4 million for the quarter.
Which of your shipping out Mike the net losses of $800000 net down to $2.6 million.
After taking into accounts all of our R&D costs as well as prelaunch and launch cost of relevant businesses.
Yeah.
Thank you regarding shareholder dilution as a result of the 2 Q1 fund raises the share price fell back significantly after the second race, what can you share the reassure investors on these points.
Yes, it's a question on helping us on the dilution I think is the most of the sometimes misunderstood where the.
<unk> alright is the non.
On the strong believer first of all of that if we deliver.
On the business.
And in the way that we expect to.
We delivered the growth that we're expecting to that will out and shareholder value.
All right.
Clearly this time last year, where it will be in Q1.2020, while we had.
To millions of loan outstanding $6.4 million of preference shares outstanding the only $3 million in the bank.
The 37% of 34% stake in micro net.
Why are we off the day $123 million from the bank.
In the insurance Division is just on a great quarter on these growing I'm pleased with all of the Buzz the measurably stop trading platform is about to come online and these now funded should be able to go and deliver upon these promos on the <unk>.
Modest the exchange, which is perhaps the on from here of the 3 as well on we will see an overall.
The positive impact on the shareholder value I would argue the Tucson races, we did about a significant accretion to shareholder value. It made other shown in the share price today.
Share prices of all of the trial and as I keep saying, we deliver on the business plan, we delivered to what we believe in and that.
The share price will like yourself.
The end.
Thank you.
Our final question.
Analyst research is important to help the market understand the companys potential value. When do you expect your first analyst research to be published when can we expect the analyst coverage imminently.
Yeah.
Okay. That's a very fair question. So on that I discussed of the number of shareholders at different times.
On the true to say that I'll draw the full range.
On the spoke the research sooner of the behalf.
The search analysts in the USA the extremely stringent on the advisory the C. While many of those people who want the Reits about if they wanted to see a quarter of numbers.
They didn't really want to lights on the company.
<unk> had no revenues.
Those conversations have already started they are in the nascent stage, but now we've delivered all the Q1 numbers 1 of the bypass because over the next couple of weeks.
Pick up the threads with some of those analysts again on hopes that we can.
Multibank on incentivize those size of encourage those guide to lights about the process of but what shareholders must be lateral is that process is not the and the media 3.510 day. Thanks.
The great thing about research on the America.
Is that they are very diligent on.
They go through bolt on all of the business before day right and so that can take a number of weeks, but the.
What I can report is that those conversations have started on.
With the numbers now reported we hope to make significantly more progress.
Thank you Darren on <unk>.
Jamie we will now open the queue for questions from participants. Please go ahead.
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Speaking on the call.
1 moment for our first question.
Our first question today comes from Brian Kim Clinker from Alliance Global Partners. Please go ahead with your question.
Hi, Darren great quarter, Thanks for taking my question.
I'm curious on the stock trading platform 1 of you can share with us.
If youre willing given the competitive a little bit how are you.
Do you plan to acquire customers, what's the strategy to make them aware of your new App.
Brian That's a very fair question on I'm going to be as good as I, possibly can.
We would like to answer without getting the secret of all sorts of way because it can become only true evidence in the coming weeks.
And I'd really.
I want to keep our competitive advantage whether it is what I will say is that this management team. We have has a long track record of acquiring customers in this region of the world.
We have peak of from the industry, who know what that during the have a great markets from seem on we think the hub a couple of.
The exciting.
Marketing promotion of ideas, which by you will see positive results from it I don't really want to say too much publicly because as I said, it's a very competitive marketplace artists of the few weeks from launch and I just want to ensure that we keep ahead of our competitors.
Great and then.
I understand that and then on the.
The insurance business is there any details you can share with us where about 2 thirds into the second quarter you talked about the progressing in the second quarter can you talk about maybe the number of increases in customer accounts can you talk.
Any sense for how much stronger.
It appears so far the second quarter's gain.
The month basis has already been executed or anything to share with us about the second quarter and how it is playing out so far.
That's a very fair question on again I'm told by my lawyers I can only answer.
Give information that was announced publicly today, Paul can answer differently, perhaps used to say to you that.
We have to remember that in the first quarter on.
All of.
This year we.
How the 2 to 3 week impossible <unk> Chinese new year, which is like Christmas in the west the model of happens. So the February was not the most active of non scores and yet we still delivered a really good quarter, we don't hub.
Scott.
We don't have that.
That means of payments in the second quarter on what we also did in the first quarter was get the nationwide license and then getting that nationwide license, it's allowed us to bring beecher.
Sure, Matt So I'm going to get higher margin sales.
It's allowed us to sign up more brokers, who are coming on stream can support what we do on the beat of <unk> platform.
And I think.
<unk> is in this quarter on you will see much more of that next quarter is allowed us to sign up relationships with key insurers, where we can get back.
The commission rates, thereby increasing the margin.
The results of that nationwide license and I think the final thing to add to that these rules of the seat fairly shortly a launch of 1 of our key b to b to C platforms with the major.
Chinese ports all of those we will see what we hope Hall Cigna.
Significant increases in revenue in Q2 will be on.
Great. Thanks Darren.
Thank you, but once again, if you would.
Once again, if you would like to ask a question. Please press star and then 1 to withdraw your question you May Press Star 2.
Again that of Star and then 1 day joined the question queue.
Okay.
And ladies and gentlemen, Im showing no further questions I'll conclude today's audio question and answer session I would now like to turn the floor back over to Darin Mercer for any closing remarks.
I have no closing remarks, except for the thank everybody for showing that time with us This morning on.
A lot of this to speak to that.
Yes.
And ladies and gentlemen, with that we'll conclude today's conference call on presentation. We do thank you for joining you may now disconnect your lines.
Thank you.
Yes.