Q4 2021 mPhase Technologies Inc Earnings Call
Greetings welcome to the Msas Technology's fiscal 2021 earnings conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad and please note that this conference is being recorded I will now turn the conference over to your host Bryan front of you may begin.
Good afternoon.
Noon, everyone and welcome to M Phase Technology's fiscal 2021 earnings conference call.
Minder, the Enphase fiscal year, ending June 30th 2021 so all figures presented for this period for flex and date.
Yesterday, we issued our fiscal 2021 financial results press release, which highlighted a number of financial results for the fourth quarter and full fiscal year.
Copy of the press release is available on the Investor Relations section of our website and the complete financials are posted on Edgar before.
We're beginning our formal remarks I'd like to remind listeners that today's discussion may contain forward looking statements that reflect management's current views with respect to future events.
Such statements are subject to subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward looking statements.
M face does not undertake to.
To update any forward looking statements, except as required at this point I'm pleased to turn the call over to M. A C E O Aren'chu bought Nagar. Please go ahead.
Thank you Brian. This is our first earnings conference call and it's been a long time coming but we wanted to make sure we had the necessary pieces in place before we unveiled our strategy.
First I will discuss the company's overall strategy before we provide a brief overview of the financials for.
For more than a year, we have been developing our empower an ecosystem to harness the power of the EV Revolution, which we believe will transform the way people shop dine fuel and interact with the world.
Today, we wanted to give you a better understanding of our unique approach to this future.
And our plan to bring together consumers and retailers in our ways previously not possible.
The transition to E V. As the dominant form of travel is complex viewed as an opportunity to do some and a major threat to others. We believe that we have built a much needed set of tools that will help improve the interface between retailers and consumers throughout their transition.
We have branded this under the empower name, which describes an ecosystem consisting of EV charging stations ultra fast five G connectivity.
And AI driven consumer engagement software.
Our empower ecosystem has evolved out of our own effort to build an AI enhanced travel platform combined with our AI engines and close com's consumer engagement platform.
We already had the problem components the mapping the points of interest locations built into our platform. So the transition to this EV platform was more of a case of adapting our products rather than building from scratch.
We realize in 'twenty 'twenty that are powerful consumer oriented travel and engagement tools could be integrated with EV charging stations and five G connectivity to address some big changes coming in the way people travel and fuel.
So we didn't just design and ordinary app, but set out to solve a problem experienced by EV owners today, while also helping retailers future proof a post patrol in reality.
The best way to understand our empower ecosystem and why it's so rapidly gaining traction if you look at each of the parts. The EV segment is fairly straightforward, we're installing level two and level III Chargers under our own empower brand name, we're sourcing the stations from well known OEM suppliers.
So we will be equivalent to the biggest names in the business in terms of equipment itself, but unlike some charging configurations, which are a row of inanimate objects at the corner of our property our stations will be connected devices acting as point of interest on a map that extends beyond the locations into retailers in close proximity.
<unk> two each station.
Today, the issue of range anxiety is very real and something that can only be solved by the proliferation of charging stations.
So theres an open window for their real estate grab that's going on around the world and we have developed a significant conduit into a very large number of high quality locations in the U S. Our announcements to date are just a sampling of our sales pipeline in what is still a massive untapped market.
It's easy to view us as an upstart in E V with a later start than better known names in the field, but on the other hand, we are highly experienced in consumer engagement AI and travel software.
We have years of development behind us and patented and proprietary technologies in those categories. Other companies in the field have little or no experience in these value added technologies. So we have a very real opportunity to leapfrog the industry in terms of building a more complete.
<unk> solution set.
That does more than just dispense electricity into a battery.
The technology behind this is our AI driven consumer engagement platform.
This is a comprehensive promotions and incentive platform that learns specific consumer preferences and extends targeted incentives to consumers to drive sales to a retail location a key target for this part of the platform is a quick service restaurant <unk> such.
As subway Burger King Mcdonalds and other similar locations, we offer a very affordable program that enabled retailers to drive traffic on demand via coupons and promotions.
The rois can be very high over 300% with a quick payback period.
In this era of privacy issues one of our great features of our engagement platform is that it is anonymous learning habits of each phone holder, while keeping the identity private debt.
The privacy features combined with a very affordable price makes us a compelling offer in this space.
The third element of our ecosystem is ultra fast five G. Contrary to the steady stream of five G television commercials touting various levels of functionality all five G is not created equal.
We're installing millimeter wave five G that can generate download speeds in excess of one gigabit per second which is about four times faster than most public five G networks.
Sites with strong five G are highly attractive to power users, particularly individuals' operating out of a mobile office.
At sites, featuring our top tier empower five G retailers gain a new incentive to attract customers, while we gain it footprint capable of supporting local or regional private networks.
This gives us an opportunity to provide service to municipalities schools and other entities.
In need of extra speed and coverage and their mobile computing.
The five G technology segment has an opportunity to generate multiple reoccurring revenue streams. So it is an important element in our concept to create multiple sources of reoccurring SaaS and Paas based revenue at each installation.
Co location opportunities for EV charging and five G are numerous.
So this is a natural combination of technologies at many sites for property owners. These services add value to their real estate and businesses. So they represent highly desirable capital improvements, particularly for owners operators looking to remain competitive in their local markets.
One of the key features of the empower ecosystem is it adaptability because it gives retailers the option to embrace the green future in stages. Some sites are not quite ready or simply cannot install EV charging due to restrictions from site configurations, but these locations can still participate.
And our empower ecosystem via consumer engagement and five G components.
Four chains. This is a very important attribute because it enables them to enhance their green footprint across our entire organization.
In that regard empower is appropriate for any location desiring more customer traffic, but the program really shines at the locations that can install the entire stack of consumer engagement five G and EV charging.
To better illustrate this problem today I would like to share my own experience on our recent road trip in my electric vehicle.
My vehicle, let me know that I need you to stop at a particular charging station I had 6% battery left when I arrived at a closed restaurant parking lot at night with no restrooms or amenities. The next closest destination or charger was too far away.
Our empower platform is uniquely designed to avoid this kind of scenario.
In our model, we have the same user interface.
But with a much better engagement layer, where based on the drivers profile. Our AI system can direct a driver to a preferred location.
If I had the empower system. It would most likely have said instead of stopping at the 200 mile Mark There's a coffee shop at 170 mile and Mark why don't you stop there.
The software would also know by my past actions that dislocation would have my favorite coffee and have five G connectivity. So I could do a bit of work while I waited.
And the empower system could take it a step further by presenting me the menu, giving me an easy way to preorder something my food would be ready when I arrived I could plug in and go to the restroom grab food eat charge up and get back on the road I would be a happy empower customer and a coffee shop.
Get a visit from a new customer there would not have otherwise seen.
This is a distinguishing feature between empower ecosystem its ability to serve the needs of the consumer and retailers under a single platform.
Now on or turn briefly to the financials fiscal 'twenty 'twenty. One was the first profitable annual results and the company's 25 years in business. So we are proud of that achievement.
Our core business is exceptionally consistent with little change quarter to quarter, but Q4, we had a number of one time events that affected our profitability. However, these events also left us well positioned for future growth. The most notable of these actions involved our financing activities, where we raised $10.0 million.
In which enabled us to eliminate less desirable forms of debt and provide us much needed cash.
We ended the fiscal year with $7.0 million of cash.
This activity coupled with better receivable collection has significantly improved our balance sheet.
In terms of individual line items for the quarter revenue increased slightly to $15.0 million compared to $13.0 million in Q4 'twenty 'twenty.
79% of the revenue comes from subscriptions, 12% from service and support and 9% from application development and implementation.
These ratios are fairly consistent quarter over quarter, we saw some improvement in gross margins, which increased 190 basis points to $35.0 million compared to 25.9 million the same.
Year ago quarter.
We recorded an operating loss of half a million, which was primarily driven by a 205% increase in software development cost as a result, Q4 showed a net loss of point 4 million compared to a net income of <unk> 3 million in the prior quarter end point 8 million in the year ago period.
Two significant one time events are noteworthy during the quarter. The company negotiated a onetime payment of 235000 to eliminate its largest legacy debt of 784000, which resulted in a 549000 gain upon its settlement.
We booked a large gain on change in fair value derivative liability for approximately 762000.
Since the company paid off for convertible notes during the fourth quarter, the existing derivative liability, which was established in our prior quarters was eliminated as a gain.
The net effect of all this was positive in the sense that the company now has a cleaner balance sheet with five significant debt vehicles paid off and replaced with more institutional debt instruments.
All of these actions were central to position the company to qualify for better forms of capital in the future.
In terms of our results for the full year annual net income set a record of 1.7 million compared to a loss of $15.0 million in fiscal 'twenty 'twenty.
Annual EPS also improved to two cents compared to a dollar and eight cents loss in the prior year.
In April 'twenty, 'twenty, one and phase recapitalized with $10.0 million in new financing, giving the company its best financial position in many years.
Stockholders equity established a new record of $18.0 million, a 112% increase over the $10.0 million figure in 2020, and an important milestone as the company does not need to complete an equity offering to qualify for an uplift to a senior exchange.
We're particularly pleased to report that due to continued improvement in the company's financial condition.
Our plans for future profitability and capital Theres no longer substantial doubt as to the company's ability to continue as a going concern as reflected in our recently filed 10-K.
This is more than just a matter of semantics, because our growing pipeline is expected to begin generating new revenue in the very near future and we have significant cash and cash flow to launch our most important projects.
We entered a new growth mode that will require additional spending and eventually capital, but all our projects under the empower umbrella will begin with some level of core monthly recurring revenue.
Which will increase as we layer on EV and five G installations.
The recent store owner Association announcement for empower installations in Florida, and Illinois represent around 1800 sites, but are just a fraction of our target customer base, which will eventually extend across the U S.
We will start with smaller steps first but we are encouraged by the size of our pipeline it.
It is important to remember that every empower participating site can generate some form of monthly recurring revenue very quickly via consumer engagement part of the platform with later growth coming from same locations as five G. M. E. V are installed as a result, we expect to show accelerating quarterly revenue at <unk>.
Installation cycle gains traction.
We utilize both software as a service and technology and as a service models SaaS and paas, respectively to create multiple revenue streams from a single location. So the positive impact on our revenue in the future quarters could be substantial.
Understanding the capital required for this growth the company is targeting segments that have very favorable equipment financing options subsidies and grants from government sources and considerable interest from financial institutions.
As we grow we will need to expand our resources, but our rapidly improving financials have put us in a great position to access better sources of capital in the future.
I would like to spend the last part of today's call discussing what we have planned for the remainder of 2021 and what will be on tap for 2020 two.
Operationally, we intend to name additional independent board members as well as establish board committees.
We hope to hire a CFO in the near future as well as other experts in areas, where we need industry experience at high levels to fast track our partnerships.
Forecasting EV charging is complicated at the moment due to the wide range in electric costs subsidies and rebates that can vary by state and county.
Furthermore, we do not know which sites will implement the full EV five G and engagement stack until we complete a site survey.
But I can provide a framework for the kind of scale that is ahead of US every site will carry at minimum or consumer engagement software and will generate somewhere between 50 to $100 per month in recurring revenue.
About half of these sites will qualify for five G.
Which is another $50 per month, and we will expect about 15% of every location to qualify for E V installations.
We expect each site to have an average of four ports.
And utilization of around 10%.
Our current sales pipeline has more than 30000 targeted locations. So it will be fairly straightforward to judge our success as we sign new contracts and began booking revenue.
Because the majority of our revenue is reoccurring and the rollout process will occur in stages, we expect to establish a pattern of accelerated monthly quarterly growth.
We are really excited about this trend because the margins are very high on the SaaS part of the business, which will support the overall margins as we layer on more capital intensive hardware driven past parts of our ecosystem.
As a company we have kept a low profile because we wanted to began locking down our site partners. The EV charging business is really a real estate land grab at this stage in its growth cycle. So it's important to secure as many high quality sites as possible.
This is particularly important for our company as we work to create a premier value added network in the industry.
Our goal is not only to future proof our empower location partners, but also to future proof our network against that time when Commoditization comes to this young industry that might be years away, but location location location is a phrase that has never gone out of style.
We get a lot of questions about pipeline and how an upstart like M phase could make so much headway. So quickly, but we have a simple answer to that most companies in this industry approached a problem with the battery and dashboard as they're starting points.
But our starting point was a consumer and the store owner.
With this user centric approach, we can now offer everyone in this EV value chain more than they get from any other provider.
To understand where we're going with this it's important to look closely at our pipeline.
The low hanging fruit for us is that class of retailer most threatened by changes in the way people fuel such as gas station and associated convenience store owners.
They're facing a future similar to holders of taxi medallions, when Uber and Lyft arrived on the scene. We have heard from some of these operators that the value of their gas station properties will peak in just a few years as the future of gasoline becomes more uncertain.
So they're very motivated group that will embrace E V out of necessity.
But beyond that obvious retail segment restaurants hotels bowling alleys grocery stores and other retailers with available parking lot spaces are also eager to add EV charging to enhance their value of their property.
We have a full pipeline of sales prospects in all of these categories. So our goal is to add new customers in each retail type to build use cases and momentum.
With the world of business now emphasizing environmental social governance ESG practices, we intend to take advantage of the fact that participants and our engagement software are automatically part of a verifiable ESG positive platform, even if a participant cannot.
Stalled EV charging.
By participating in our ecosystem our partner customers are helping proliferate the building out of EV charging sites. So we offer a direct way for companies to be ESG.
Proactive beyond the limitations of their inherent business store locations.
Every day, we get a new affirmation that our empower ecosystem is a right solution at the right time in the form of interest from potential new customers and partners. We look forward to providing tangible evidence of that interest in the form of additional deals that will help make the empower brand.
A well recognized name for mobile consumers and retailers throughout the U S.
If there's one thing that I hope everyone takes away from today's call. It's that we are entering a growth phase armed with technology offering that is resonating across many retail categories. We believe that will translate into great momentum into <unk> 2022 and beyond.
At this time I would like to open the call for questions.
Yeah.
Yeah.
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One moment, please while we poll for questions.
Yeah.
Hum.
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Our first question comes from Michael Rendez with the Benchmark Company. Please proceed with your question.
Hey, Andrew Thanks for the update.
Thank you.
Michael.
So I want to better understand.
Opex for the consumer did.
Do they have to pay for the App subscription fee associated with that at this time.
No. So for the consumer there's no theres no fee for the consumer we will be providing them an app. So historically, we actually worked with the retailer and with their retailers App under our current model. We're also extending this to our own our own platform. So basically within the next.
A few weeks, we'll have our our site or app that consumers can download and essentially a no charge to them. It will be used for both their charging network as well as our consumer engagement platform with retailers. So we have our own royalty a rewards program and everything else built into that but no charge to the actual consumer itself.
Gotcha, and so how do you promote the pickup.
So each location will be one we have an NFC chip built into like a sticker or or.
Counter display and where essentially the retail location would basically push.
The adoption of that App, because they're incentivized for that as well. So that's part of the consumer all they need to do is touch their phone or bring their clothes phone to that counter or on the counter stick.
Sticker and that will pop up our app and they can just press download and they'll have that that downloaded and with that we can kind of load their digital wallet with discounts and coupons may be immediately upon their purchase right. So similar to you go there you have a $50 Bill you touched this thing you get 20% off immediately so there's a there's sort of an immediate incentive for P.
People to download the App and then there'll be a continued incentive for them to keep that are installed.
Gotcha, Okay and so.
Who will be paying for the hardware.
These locations either for the charging station and or <unk> equipment.
Will that cost be borne by <unk> will that be borne by the.
The retailer.
So we have a kind of so as far as the <unk> concerned where enphase will.
Paper bulk of the cost because our largest strategy is to build our own.
Private <unk> network, essentially a wisp around that location and hence the dense locations, where we would be getting a lot of revenue from many other sources right there'll be a lot of other users that can get on our platform and pay a monthly subscription fee.
But as far as the EV charging is concerned it's a combination where we have certain customers who want to own. It outright. We also have some hybrid model and then in some cases, we've actually partnered with finance companies that will essentially provide us a hardware on it.
Almost like a cast model right, so there'll be giving us a per location per month charge.
And that would be paid for through the through the subscription itself right. So that's something we've worked out with the with different locations. So we have a hybrid model, which will be kind of postings.
I would say in the next.
You know, let's say 30 days or something we'll we'll kind of get all our model worked out and share that with everyone.
Right that's fair.
Okay, and then as far as the App.
Can you talk about.
The inbound calls that you're receiving for Hanmi.
Gains or others, who were playing in the EV charging thing now whether or not they're directly associated that they just want to be.
You know what that might look like.
Sorry can you repeat that question again.
What is the.
<unk>.
Call spectrum look like for.
And the retailers or other EV charging installers because.
Because I think.
Regardless of the multiple revenue streams, I think that there'll be a wave of folks who want to be on your app right.
All right.
No.
It seems that every EV charging company that's out there you know maybe competitors in some way.
One would be on your App.
Sorry.
Yes.
Oh, absolutely and I think that honestly, what's what's been the sort of leading driver we're not only talking to like the independent owners, which has become a very kind of niche market for us because it's a unserved community right, where they're basically are not being targeted.
By or even approach or even they're having a tough time, even when they reach out to some of the other companies that they simply don't want to deal with them because it's an independent one single location and it's just not something that they're interested in where you know we feel that the industry is changing and they are feeling that the industry is changing when we sit down and have conversations.
<unk> with them they realize that for them to partake in this future they have to be changes right. Both on the green the EV charging but also the engagement side of of of how the world is changing how consumers are going to be be going to work and and how they interact with one another all of that is change.
And they are not well positioned for that so when we kind of walk them through our our engagement platform that absolutely love It and that's really been a key driver behind.
Behind our rollout and we just have a tremendous pipeline at this point in terms of of.
Interest and you were just kind of working all of that out as we speak and we sort of reflects on the on the recent announcements, but we're also working with a lot of big brands as well.
So so there'll be a lot of interesting announcements on that front as well.
Let me just try to clarify the model a little bit if I could or bump question have you clarified a little bit so by then.
Robert on the EV vehicle and.
I already have your app downloaded at Roland <unk> subway suggestion from your App.
And I purchased a meal and dry maybe.
Maybe this promotion attached to that.
It's part of that whole transaction and of course I'm sorry, It's my vehicle and maybe ultimately five G services well.
What is the revenue flow.
Your company as a result of that whole process.
Sure so.
So there's there's two types of sort of revenue models that we have one as a reoccurring model that we have from the <unk>.
From the property owner itself right. So.
That would include our platform that we license to them and which includes a reoccurring model from both the consumer engagement platform as well as the as well as the five G model and then Theres a separate sort of model around the EV charging which.
You know, which is a little more complicated for us to really provide guidance on right now, but even aside from that there's many additional revenue sources for the company when it when it comes to.
This type of platform, there's a whole whole separate revenue stream that comes from driving traffic to locations, where we can actually end and the coupons, where we can get actually a percentage of the of the sale or their or their promotion that where we're offering and we also have a lot of interest from our company.
Who are wanting to get their products on our platform and they're looking to either pay per site fee, where they can actually give us a fee to get their products and locations as well as percentage of sales.
From products that are sold so we are actually looking at a much more expansive revenue stream that will come out of this.
Right.
So at this point.
Hilton are still being worked out or.
Yeah, well, we have a model where you just kind of because there's a lot of our components that we just need to kind of build into it because especially on the EV charging side right. There's a.
Theres a whole every state counties is and sometimes even cities have different pricing structures that that we need to work with as well as demand charge and and many other factors that go into this so we actually have engaged outside consultants to actually build that model in and work on that for us and we're pretty close to being able to provide more detailed guidance around.
That.
And at the same time, we're actually in the process of rolling out our alternative revenue streams for really get to that point those are.
Still some time away, but at the core of our model right. The core of our business is that reoccurring model that I talked about which is about $100. A 50 to $100 per location for the engagement platform, there's about $50 per location for a five G and as we roll the five gene network out we can offer the same services to school.
Those two counties through government facilities again $50 per user per month, and that's something that doesn't even come from the school board ready to comes from federal emergency broadband funds. So this is all part of the cares to act, where we can get a tremendous amount of subsidies from both the federal government.
As it relates to five G connectivity as well as EV charging so a lot of that stuff we haven't.
Disclose yet because there's a lot of things that we just need to kind of work out on an on being able to disclose that model.
Understood Alright, fantastic I look forward to you anymore.
Thank you.
At this point, we have reached the end of the question and answer session.
Ill turn it back over to Andre for any closing comments.
Well, thank everyone for joining us going forward, we intend to hold a quarterly call for every earnings release. So today marks an important starting point in our investor outreach. Thank you again for joining us today.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.
Yes.
Okay.
Yeah.
Uh huh.