Q1 2021 Ault Global Holdings Inc Earnings Call
Assessment of new EV, which they start delivering on EV Chargers in this quarter in the next quarter.
To see a ramp in those Ken why don't we can cover real quickly.
Any comments you have on correction and Kula says I have some comments and of course, maybe you could cover of grassroot.
Okay. If we can go to the next slide. Thank you we did see a gresham grew $2 million from Q1, this year compared to Q1 of last year.
The $1.8 million of that growth came from our acquisition of Ralph like electronics and the U K, we bought them in November so in Q4 of 2012.
So they are contributing nicely to both topline and bottom line of aggression coolest of some modest growth 16% year over year.
And then also alliance, which includes our our lender digital power lending also the lives was up.
Sure.
Significantly as we talked about of the previous slide over $5 million from lending of trading at 130, K from our crypto mining activities 1 of the things we're trying to introduce to the shareholders and investors. After start thinking of the holding company is owning different platforms and the platform. We have is commercial debt.
Fans from electronics, which is the question worldwide of.
Obviously those of most people most shareholders know we own intertek in Israel.
As recently Sadly, we know that.
Defense is still needed and it probably will be needed for the foreseeable future.
So this platform led by Jr, Reed and Tim.
Long really is the defense platform now that is an independent company that were of sole shareholder of <unk>.
We're going to talk later about this but this is really a defense platform set to make acquisitions in the defense space and really ramped out the defense electronic part of their business there.
For their naval business for on the go ongoing stuff they do in Israel, and the ongoing stuff that doing Connecticut.
This is the first time the in the company's history with the proper capitalization of where these subs are properly capitalized enable the grow and really have a strong balance sheet and develop their own balance sheet for more earnings power. So what we see out of the defense business as earnings power of revenue growth et cetera.
The coolest aside a lot of investment of EV and this is a big space for US we believe in electrification of the United States and the world and so in the coming quarters ahead, youre going to see a lot of product development and announcements of our products in the EV space. So all of the revenue there is small the cooler for us.
Roll forward basis, you'll start to see that ramp as they introduce new products and product lines on the ultra alliance side of this.
Is really something that we've been working on for a long time with the lender of the licensed lender, which affords us a lot of opportunity and a lot of investment.
A lot of earnings power here. This is a fully funded Len.
Lender funded datacenter that's building out really we only recognized to think what 95000 for the quarter on the datacenter side of the real estate side.
Ken do you remember what that number was no. It was a modest amount on the.
It is generating some revenue from the commercial real estate aspect of the data.
Yeah, Let's go to the next slide 1 thing Gary Please move to slide, but 1 thing I wanted to point out to everybody on the call is earnings power of the ability for our balance sheet to really grow top line and grow earnings over time and this is something we're really focused on.
Obviously, we will sacrifice a little bit of of earnings for investment. So we're not suggesting we're not commenting on future profitability. What we're commenting on is that we are of very powerful balance sheet. We don't we don't we don't want for capital right now we have access to capital.
As of to date, we have not used the other $75 million on the ATM available to US we've left that sit there.
We reserve the right to do what we want to do there, but we have that.
Ken I thought we should talk about a little bit about the gross margins, which were fairly dramatic improvement in gross margin, maybe you could comment on gross margin a little bit.
Yeah, Yeah gross margins improved significantly where.
$6 for Milan, and what happens is the.
The lending and investing activity at <unk>.
Digital power lending the $5.2 million, that's the 100% margin business for us.
And so so that's that's really impacting our gross margins significantly kind of of that mix more heavily weighted to landing compared to our defense electronics business, which had those traditionally are the 30 plus percent margin, but it makes sense of $5.2 million.
Essentially of 100% margin Thats really improved.
From the prior year quarter.
Our banking or banking M&A and private equity slash venture investing.
Part of our portfolio.
It really does add a lot of margin, especially as you see a cycle of improvement in terms of us monetization monetize monetizing some of the loans keep in mind some of the loans we make.
Interest and other instruments that reward us for making the investments. So they can be pretty lucrative Ken I don't know if you want to comment on them that all of you may not want to but I wonder do we want to give any kind of like maybe thoughts on how people should think about the leverage we have on the lending side or is that really not somewhere you want to go right.
Something that we do have some of our lending is income.
The convertible notes to us public companies and also the some private companies.
And so we do we do make interest income.
The contracts dual rate on the convertible notes, but we do have tremendous upside as we can't convert we have that choice. So if the stock is up we can convert make money and then those also come with warrants. So we have.
The 2.2 instruments there the convertible notes, which can be shares and the warrants we can turn into share. So as we fund some of the smaller companies and they they.
Make positive moves we do we do benefit from that beyond.
Just the contractual interest rate some lenders you my.
Pencil and Theyre getting.
We're at 6.8% on capital deployed where we see some opportunities to earn multiples.
The capital deployed because of the outside of the underlined stock of these companies.
Right 1 thing I 1 of the plant the awareness that we had a net income of $2 million, but 1 thing to notice on our operating expenses as youre going to see capex for the EV business.
And we're going to put a lot of money behind the be want to see that happen.
You see the sales and marketing expenses increased we put we invested money in sales and marketing and on the general.
Administrative side, you saw us invest pretty heavily we were still profitable for that quarter. So the that can tell you the kind of cash flow. We think we're going to generate we're pretty happy with the results there was a credit impairment.
Was that of that was an improvement for us wasn't in the third quarter, but how about a million dollars, where we saw it was the last year's Q1, we have the provision for credit losses. So when you look this year over the last year.
<unk> had that provision and this year had no no impact from credit for.
<unk> so.
Youre starting to you're starting to see is pull away from the COVID-19 issues I mean really can't I don't know what you think about operationally in terms of how COVID-19 is affecting this but would you largely consider a guide you that we're kind of pretty much starting into the 2 I mean.
We're still experiencing that over in Europe, a little bit, but the MTI ex but would you largely believe that most of the COVID-19 is starting to get behind us for.
For us I believe so and.
Part of that is our defense business in Connecticut and in Israel.
They are essential businesses and.
And so they are really the government says you can't the shutdown.
Central to the defense infrastructure and you have to for.
Continue to be opened of produced through that so we saw minimal impact from 2020 as we've come into 2021.
It's even less and so yeah I think it's.
There's always uncertainty on this topic right now with our current results and our current run rate.
We're firing on all cylinders for those businesses.
Yes.
1 of the transition to key corporate initiatives and these are important to understand these are initiatives some things for shareholders and investors should look at our Gresham worldwide. The business is actively pursuing the opportunity to go either public.
Or do you of public market transaction now any scenario here we were.
Would still be of shareholder consolidate them, but they will have their own balance sheet in the publicly traded this is something we're looking at the potential here under key initiatives. The other key initiatives sort of slide 7 net that's kind of where we have these bullet there that would be kind of.
So you see you see there on slide 7 exploring potential IPO and other transactions progression of worldwide to access the capital markets.
We wanted to do things that we believe will reward shareholders. Obviously, we're all shareholders.
We are definitely looking.
Pretty actively in bringing the EV business public. These are all exploratory right. Now these are all of the the mission of the holding company for these 2 subsidiaries has been we've clearly mark this out for the last couple of years. The we ultimately 1 of them to be separately publicly traded with their own balance sheets of this is something in the coming quarters ahead people <unk>.
We should be looking for updates on and we'll keep you informed on sort of on a quarterly basis or if theres any news, we'll announce that during the quarter. If we come if the decision has been made about what how we're going to pursue this the.
The completion of the data center is really important this is of 16.617000 square foot facility.
And we are building.
Building out 30000 square feet of it as we speak we've been doing the now for the last quarter.
That's amazing construction of we'll keep you updated on that we do expect the ramp up in crypto currency mining, even though prices have been pretty volatile we have committed ourselves to turning on all of the miners we have in Michigan and ramping up the facility with new miners will keep you updated on that 1 thing most investors would probably be pretty exciting here is that.
We've been significantly able to invest in the project that is the $50 million purchase order for the MLC platform. The laser platform of the textile platform in England and despite the fact that Covid is still affecting Italy, and other things that you shouldn't see significant developments in this this year finally hopefully.
Some clarification and some real good thoughts on what happens with the 50 million of our purchase of this is something we're committed to more than ever as we see customers want. These machines. We believe in the future of MTI ex and so this for something people should look forward to in the future and we will keep you updated over the next couple of quarters. These are key initiatives, we want you.
Look at <unk>.
Expanding our loan and investment portfolio of digital power of lending. This is important this will drive revenue for the company, especially of high margin revenue. This is ongoing and the last 1 is future acquisitions. So now we are pretty active in the space of looking at companies, but our balance sheet allows us and affords us the opportunity cannot maybe you could elaborate.
Kind of a forced us to look at bigger deals that have more significance.
In terms of of.
Adding you know of free cash flow and stuff like we're looking at different deals now that are significant and the this is something we think could happen in the next couple of quarters can any thoughts on that any commentary yeah. I think when we've done some transactions in the past we've been somewhat limited by our capital structure, historically, where we could do.
Low single digit millions of dollars and the currency of our stock was somewhat.
Limited, but we're happy the 2 with the proceeds we received from the ATM financing.
That does allow us to look at the different caliber of company larger.
Better bottom line, maybe less distressed from some of the transactions we've done so it is.
It is exciting with some of the opportunities that are coming before us.
Sure Let me let me go to the next chart.
You go to the Org chart real quickly.
Gary just I think it's 2 slides down.
Yeah.
If you look at the Org chart, 1 thing I wanted to bring your attention to the bottom as Youll see James Turner, Deputy General Counsel and VP of legal affairs lower of camera Assistant General Counsel us on there also we continue to ramp out you'll see Douglas Gantz, who joined US He was CTO, Joe Spaziani who's been with US the longtime 1 of the longest standing employees moved the Ci.
And we're really ramping up the space as we support our subsidiaries and.
People may think well I know the returning of what does that mean for your well. He is the specialist in M&A and we really are bringing in house people that can help us expand.
Ex Florida or expand our capabilities now Ken if you don't have anything off so I'm going to get to a couple of questions real quickly and then we're gonna call. That's the short call today as you know we have a lot of things going on <unk> do you want to add anything that I may have missed no I think we should move out of the Q&A time.
Okay, 1 of the questions I've got directly.
Was the ultimate the IP ago now it recently, if you look go the FCC Dot Gov, you can see the older Man L D.
Z a N E N. The neuro filed an S..1 they had 2 prior confidential filings. So we can't comment on the existing IPO.
And we cannot comment on how that would affect earnings I know people have sent me direct messages and questions. We really can't comment we're in a quiet period there.
But obviously its clear as day to the public if you read our filings that we are committed to putting in $10 million into.
And of the private company and we obviously how about what we can the considered to be of great price.
And it is something that we're very excited about and when it goes public we'll of course, let people know when and if it goes public we'll let people know how it affects our balance sheet can do you have anything to add on ultimate I know you're the CFO. So maybe you can't really say anything.
Yes.
Quiet period, so I would tell you if people are interested they can go to see that kind of and then looked at the S..1 filing and we really can't comment beyond that.
Alright, Gary any other substantial questions so far.
Otherwise I'm going to thank everyone for being on the call any questions that are important here.
Yeah.
Yeah.
Okay I will answer 2 more questions have you access the ATM I said earlier on the call we have not access the ATM the 75 million of still sitting there.
Okay. Let me, let me think about this whole on the other question, yes that will update the Michigan datacenter sometime probably in June.
And with that in mind I don't have any other questions I'm of the answers at this time, Ken I. Appreciate so much for being on the call for all the shareholders of stuck with US obviously the balance sheet just dramatically improved we're super grateful for that.
Hold on a second he turned around for secondhand for myself.
We're super Grateful for all of the people who've been supportive do you have any questions. Obviously, please send us an email or the attacks or reach out to me and Ken anything you want to follow up before I hang up now.
We appreciate Oh, we're happy with the quarterly results the in the.
Trajectory, we're on and we look forward to update the next Florida.
I want to say 1 thing before I hang up and that is I I could not be more optimistic.
With the <unk> team is almost and Jody.
Douglas and.
Our new sales leaders, there I could not be more optimistic about what they're doing.
Really it's it's it's wonderful what the team they are building out their jarrod and Tim or building out of great team on the defense and that's going really well and I'm I'm. The most optimistic that I have been with the the company in a long time.
So I appreciate.
That I mean, it's really been remarkable the.
The build out of the team 1 second Kevin 1 second.
Okay.
Sorry about that guys.
Anyway, I'm going to wrap it up I want to I want of a continued to reiterate the with markets. The new sales Guy So leave your V P.
At the coolest sits in what we're doing in EV and what we're doing with question I'm very optimistic.
For the Alt Alliance team that's been wonderful we had a good quarter, Ken I know.
You're getting your feet under you, becoming the new CF CFO I know that was a lot of work restructuring all of the reporting so thanks to everybody out there to the board all of the supporters of our legal team. It's been wonderful was of great quarter, We look forward to some more cash.
Ken I'm going to wrap up if you have anything else my friend that's it right now thank you.
Alright, guys take care of everybody, but I like that.
Yeah.
Yeah.