Q3 2021 MICT Inc Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by good morning, and welcome to the <unk> third quarter 2021 financial results and corporate update conference call. At this time, all participants are in a listen only mode.
Need assistance, please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask any question. You May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.
Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes. A webcast replay of the call will be available approximately one hour. After the end of the call through February 15 2022.
I would now like to turn the call over to Scott Gordon President of core IR, The company's Investor Relations firm. Please go ahead Sir.
Thank you Tom Good morning, everyone and thank you for joining us for the third.
Third quarter 2021 financial results and corporate update conference call joining us from M ICT or Darren Mercer, Chief Executive officer of velocity Moran Omron controlled.
During this call management will be making forward looking statements, including statements that address <unk> expectations for future performance or operational results forward.
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 <unk>. Most recently filed annual report on Form 10-K quarterly report on Form 10-Q, the form 8-K.
With the FCC today.
<unk> press release that accompanies this call, particularly the cautionary statements in it.
The content of this call contains time sensitive information that is accurate only as of today November 15 2021.
Sept 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 Darin Mercer Chief Executive Officer. Darren. Please go ahead.
Thank you Scott.
Thank you all for joining us on the call on the webcast today.
We continued to deliver strong growth with third quarter revenue up more than 50% over the second quarter of 2021.
We're extremely pleased with the success of our insurance business, where our revenues for this third quarter with nearly equivalent to those of the entire first half of 2021.
Our third quarter revenues equate to a run rate of $75 million per annum, which is primarily from <unk> insurance business.
To put our growth into context, our insurance vertical is that generated revenue of $18 $5 million representing growth of more than 50% over Q2, which in turn was more than 50% up from Q1.
We are particularly excited by this performance as we are still in the very early stages of the insurance business developments.
There was a huge potential for continued strong growth underpinned by the nationwide license with China that we acquired in February.
Enhanced by our recent acquisition of licenses for 130 major cities and provinces covering most of the developed China.
It's valuable portfolio of licenses allows us to process insurance business on a daily nationwide basis, and as such we are well positioned to develop relationships.
<unk> partnerships, which will be followed by expansion into direct <unk> sales channels.
Thus, enabling those to cross sell a wide range of products with the aim of driving growth on generating higher margins.
In addition.
We are in ongoing discussions with a number of nationwide organizations that if successful will enable us to launch several more speciality insurance products to be offered on a nationwide basis.
Whilst we expect recent pressures on commission levels and the automotive insurance sector. So impacts on our short term rates of growth. This should largely be offset by the strong underlying performance of our platform and our revenue growth from other insurance products.
The combination of a rapidly expanding ensuring database, which is currently estimated to be more than half a million.
Together with a strong portfolio of licensees with nationwide coverage.
A growing range of insurance products Places places us in an exceptionally strong position and allows us to benefit from the considerable strategic advantages that we have gained.
This as well as all migration towards higher margin products sold through significantly higher margin channels gives the board considerable confidence as we move towards year end and into 2022.
Moving on to our stock trading platform.
On September 15th we successfully launched our mobile stopped trading up on our proprietary <unk> Securities platform, which was the culmination of nearly a year of intensive technological developments.
We have money sell rollout planned carefully with an initial focus on the test and learn marketing strategy, allowing us to obtain valuable data and customer feedback so that we could make appropriate improvements and refinements.
Notwithstanding the narrow scope of our initial marketing plan the number of new client registrations and App downloads to date has been extremely promising.
Furthermore, with technological performance and functionality of the <unk> payout has been enhanced considerably since launch.
We worked towards our aim of delivering a superior market leading products.
Having observed the marked progress achieved to date, we believe it is now the right time for significant marketing push as we can.
To gain a sizeable market share.
In dealing with the market speculation surrounding the introduction of new regulation with regard with regard to onboarding clients residency in mainland China.
It is important to note that Mike Pie has always being fully compliance with all applicable rules and regulations and as such we believe these latest changes are not a concern.
That said.
Our ops upcoming ability to onboard overseas clients with effects from end of November fits with our strategy to target Chinese Diaspore initially in southeast Asia and before then expanding into other territories.
To that end we have.
Been exploring opportunities to acquire the necessary licenses to operate in relevant jurisdictions.
And we will keep the market appraised awesome when there are meaningful developments.
With regards to our commodities platform.
Which as we have previously disclosed as being ready for launch since early September.
We have signed a tripartite agreement to launch in partnership with one of China's leading commodity exchanges.
As a result of the exceptional volatility in oil and gas prices since September <unk>.
Together with the Chinese government's introduction of a new regulation, which is in progress.
Our partner to whom we all reliance which used to seek clarification around this regulation.
In this regard both we and our partners are currently monitoring the situation awaiting the finalization of the regulatory framework and improvements in market conditions prior to proceeding with the launch.
It is important to note however that none of our published financial forecast include revenue from all commodity business and therefore, any elongation of timelines does not adversely impact either the revenues all running statements contained in such projections.
Moving on I am pleased to say that we continue to have a strong balance sheet with around $105 million of cash as of the end of Q3.
<unk> provides the resources needed to grow our different verticals and executing on our business plan.
Our strong balance sheet will also assist us in making strategic acquisitions as and when we identify suitable.
<unk> accretive opportunities.
And finally.
We recently filed a preliminary preliminary proxy statements that included a proposal to amend our charter to expand our authorized share count.
From 250 million shares to 425 million shares.
I would like to take this opportunity towards our shareholders to approve this measure as it is key and the key components of our growth strategy.
While we have as I mentioned, the very strong cash position.
A strong share counties equally as essential to a company's growth to conduct acquisitions more easily many of which necessarily include some components of the transaction and stock.
Rather than viewing this increased share count that's a potential dilution I believe it best be viewed as a mechanism by which we come back to provide our current shareholders with increased value as it enables us to more easily grow as we seek new acquisition opportunities to strategically expand our COO.
Set offerings.
It is for this reason that I recommend you approve this motion in the proxy.
Thank you for your ongoing support of our company's growth.
I would now like to turn the call over to Cimarron I'm wrong for a financial review of the quarter.
Thank you.
Thank you Dan.
Third quarter was 18 5 million.
And your question.
During the quarter.
Thank you Glenn Thank you.
Quickbooks. Please open the second question with that let me Echo <unk>. Thanks to continued growth.
Sure.
Let's close by.
By more than 50%.
Gross profit in the third quarter 2021 7 million.
It looks like seven meeting.
A quick question.
<unk> will significantly in third quarter.
8%.
But 12%. The second question is the company is if you look at your guidance on.
Commission of ebay and think incentive great. Thank you Youre welcome.
Yes.
R&D expenditure.
Third quarter, when you were going for medium duty to zero point, Thank you, Matt and good luck.
Second question.
Company continues to innovate.
Hey development.
Thank you.
Selling and marketing expense amounted to $1 5 million third.
Third quarter, absolutely attendee from last fall and we didn't go ahead.
Okay.
General and administrative expense thanks significantly in the third quarter to $6 6 million go ahead Bob.
And the second question.
Third quarter general and administrative expense, including more than $1 6 million.
Hey, good morning.
Thank you Alan.
Third quarter was $5 3 million dollar that's presented today.
The net loss for the second quarter.
Paul go ahead.
Finally as of September 32021, the cash position was approximately 100 Psi is meeting and go ahead.
Next CEO Darren.
Okay.
Thank you Mara.
Right.
We are very proud and excited by the progress we have made in Q3.
Foundations and key ingredients for our continued growth has been significantly strengthened.
Both our insurance stop trading business or in the nascent stage of development, but already achieving impressive growth in customer registrations on the company as a whole is generating substantial revenues.
Whilst we will continue to maintain watch on market conditions for the launch of the commodity platform.
Our drive to achieve material growth across all the Ballston tech verticals, both organically and by making strategic acquisitions gives a huge competence that we are well positioned to deliver a considerable uplift in shareholder value over the coming quarters and beyond.
The continued strength of our balance sheet with $105 million in cash will allow us to continue to execute on our growth strategy.
That said, we strongly encourage all shareholders to vote in favor of the motion to expand our authorized share count from 250 to 425 million shares, thereby further strengthening our position in terms of making future acquisitions.
I mentioned last quarter that we are just getting started now.
Now that all licenses are in place on the insurance business on the stock trading App has launched a truly believe we will continue to see significant growth and I hope you share my excitement regarding the future of ICT.
We thank you for your continued support and we look forward to sharing news of our progress with you as it develops.
Thank you I will now turn the call over to the operator for our Q&A session.
We will now begin the question and answer session to ask a question Press Star then one on a touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
And the first question comes from Brian <unk> with Alliance Global Partners. Please go ahead.
Okay.
Again, great results and thanks for taking my questions.
Okay.
First of all.
I wanted to focus on the insurance business with your expansion into a 130 cities and provinces from just 25 last you reported when do you expect to get to $1 million or even 2 million user profiles into that and what point do you see the pushing to bdcs that <unk> 'twenty, two maybe take us through.
That timeline.
Yeah of course, Brian and thank you for your comments.
We said at the end of Q3, we had around half a million dollars already underlying ensure these on the platform.
This increase in licensed portfolio enables us to we have a nationwide license and let's start with the nationwide license. We acquired I believe is great, but what you need to have to be able to process business locally is a local license.
So.
The increase in to a 130 major towns and cities.
<unk> licensees across all developed China means we can now for the first time offer a truly nationwide offering.
Online using our.
Right.
Nationwide license.
Allows us for the first time really.
Move forward with the partners on our B to B to C channels that we've been in discussions with because clearly they are nationwide organizations with very significant number basis and numbers of customers hundreds of millions and it also allows us to really push forward on the visa stake.
In terms of registrations, which from several half a million dollars.
I'll get internally it was placed with millions as we come by year end.
We expect to see significant growth on that as well.
Next year.
In terms of reliance on B to C. The beauty, we have in our structure I don't want to give the secret of our source away.
With that significant database.
With the significant databases will have access to awesome. When we saw the b to b to C relationships now.
<unk> seen very significant impacts on the on the margin that we get from southern met insurance products, so rather than getting the lion's share of this waste will be to be partner, we stopped keeping the majority of that and that gives us lots of competitive pricing advantages.
And it gives us lots of scope for significant growth.
Great.
Second question also on the insurance business.
To date is still most of your insurance revenue related to the auto insurance, where margins are a little bit lower and then when do you expect other lines of business will start to become more meaningful and do you have to do anything strategically to make that happen start selling other lines.
So very good question.
The majority of the revenues out and then also in the automotive sector, which is a sector, which.
It continues to have pricing pressures, which is why I made more July EBITDA results.
But the important strategy. We have is that when somebody comes on buys that most insurance policy with us narrow in our database. We now have the option the ability to cross sell to that person.
And we can cross sell much higher margin products be them in like the them in medical in property insurance. Additionally.
Additionally, because as you know most of us in the world have more than one insurance policy, we don't just have car insurance.
And they all are significantly high margin products.
Secondly.
Sure.
What should we expect.
The impacts of that particularly towards the end of this year, but more in 2022 is you will see the dominance of automotive insurance.
The majority at the moment that will be diminished.
As a percentage.
I guess my question is do you have the people do you have the agents do have whatever it takes and you can already operate at or do you have to do anything strategically to move into other lines.
No we don't in fact in the most strategic thing. We did was get the 130 lives is increase our licensed portfolio for 130 that means big insurers to struggle for nationwide reach true nationwide concentrated reach are talking to us about different products are talking to us about offering as well.
<unk> new products into new areas of China that they haven't had before which perhaps more competitive which perhaps offer additional benefits.
So the.
The strategic play and all of this was increasing our licensed portfolio, which we've now achieved.
Okay, I've got a couple related to the online trading platform.
Where I'm guessing given all the regulatory noise related to the two especially as to market share leaders you probably temporary market spending in late September maybe even early October as you let it all play out. So I guess my question is when do you start to marketing Blitz as I suspect some consumers in Hong Kong are evaluating their options.
<unk>, an alternative trading platforms.
Yeah, I think we said it all statement, we're about to have a big blip at the end of November.
As you said there were lots of them lots of speculation.
<unk> and roomba in the marketplace, particularly with some of all competitors being mentioned.
Newspapers in China about any indiscretion, they may or may not have made.
Great things from that perspective is that we're very confident and we haven't made any discretion as Joel.
In terms of the marketing them why we go the App has improved significantly since launched in the middle of September the functionality is much greater the performance the speed of it isn't going to be better.
What we did during that.
Pedro uncertainty walls.
You quite rightly pointed out in terms of the marketing spend.
And we then tried a number of test and learn strategy is to see which elements of marketing.
But we think we have a very good handle on that now and now with the <unk>.
Four months of the App being so much better now as we've seen this new regular regulatory frameworks.
Being introduced three mainland China now is the time for us for that push by the end of this month.
You will start seeing.
Quite a bit of evidence to that study.
And we're very hopeful from there.
From a standpoint of expenses in sales and marketing.
Can you give us a sense for what the impact of the P&L will be there on a monthly or quarterly basis.
<unk>.
The agro lending show modestly.
The other one.
To recap what I say as you understand.
But what I will have the way to answer that question I think just to say that we.
Spend on marketing has a correlation with the number of registered users we get on the anticipated spend.
We expect those customers to make on all of that.
And so.
They are very closely linked.
Last question is just kind of a point of clarification you've.
You've talked about.
Being fully compliant so I just wanted to make sure today that investors and myself understand today.
We're focused on the online trading at.
For consumers that have Hong Kong Hong.
Hong Kong citizens, but they have a Hong Kong bank accounts are not focused on someone who is just in mainland China with mainland China Bank account is.
Is that accurate.
It is accurate and thats, what the regulation states.
But what is also important for people to understand is 2 million people in Hong Kong trade on these kinds of apps.
So it's a very significant marketplace, if you say Mike.
Great. Thanks for taking my questions.
Thank you very much.
Got it.
Before continuing with questions from those dialed in over the phone I would like to turn the call back over to Scott Gordon.
Thank you Tom.
Company has received a number of inquiries by email and we're going to.
Post dose.
And then proceed with our.
Q&A.
First question Darren you currently have around 121 million shares outstanding why did the company feel it necessary to increase the authorized share count from $2 50 to 425 bearing in mind. The current share price should we be concerned about an imminent significant dilution.
Uh huh.
Well.
When considering the increase in our Chaucer, which he is not an easy task and I'll come onto that in a second.
There were a couple of things that people need to understand we have 250 million shares authorized to issue of around 121 are outstanding today.
In this calculation we have to include the number of warrants out there adoptions. So that takes us to circa 185 million shares with headroom of sets out the 65.
Hi.
This increase given the complexity of going through this part of the process.
You don't want to optic repeats and repeats and repeats and so we have taken the opportunity when we formulated this proposal to create sufficient headroom for the next number of years.
That allows us to pursue our acquisition strategy to support the rest of the business.
And I think the other thing is the <unk>.
Other thing we did say last week I think some finishing that Johnson <unk> question al.
Is.
Important to note the increase in authorized shares doesn't create any dilution of tool because they havent been issued.
And shareholders I wanted to be.
Sure that we will open the other consider the issue of new shafts for transaction.
Was significantly value accretive.
Thank you.
Your non-GAAP loss has reduced significantly quarter on quarter is it realistic to expect a move into non-GAAP profitability in quarter four 2021.
Well, you know I cant answer that so I didn't write offs of scope.
The companys number of registered customers in its insurance business is impressive.
Half a million what is the approximate registrations between the three quarters of the year and how do you expect registration is to grow in Q4 and throughout 2022.
Yes, it's a very fair question, but I think I've covered most of that and announce it too.
Brian's question earlier on the call.
Okay.
You had mentioned that your recent acquisitions, our recent acquisition of the regional licenses will enable you to launch it.
B to C sales channels, and then B to C. When do you expect.
Each of these forms of sales channels to come online.
Well again, I think I've covered much of that in and the question that Bryan asked earlier.
But all at once.
The important point, perhaps just to reiterate from the answer I gave to Brian is.
The increased number of license we have now gives us a true penetrates footprints.
Most of the Dibaba China.
Now the opportunities for moving into B to B to C and D C.
Somewhat closer because we can facilitate and support that business.
<unk> for the first time.
Yes.
Great.
In your upcoming B to B to C insurance business can you give an idea of the types of organization. You are partnering with also with your B to C business will you be launching your own insurance comparison websites and apps.
Well I'll do those in reverse order b to C.
We have developed our own app, which will be launched.
Soon.
At the appropriate time.
Bearing in mind, we have to consider where we.
All in all B to B C relationships.
We expect those we commit the company to deliver in.
In support insurance channels, we all choking too organizations throughout insurance.
On specialty products, we are talking to other organizations about malls.
Augie specific type of products.
And we clearly talking to a number of channels.
Partnering them on our website as our insurance partners.
Yeah.
Quite a broad spectrum movie.
Great.
Your margins in Q3 have increased sharply compared to Q2 margins do you expect such margins to be maintained and your b to B insurance business in Q4 and beyond.
And what do you expect your gross margins to be from B to B to C business and B to C.
Well I'm not going to announce that in specifics because I think it's a little sensitive.
So just to give.
The questions in respect sounds a bit of announcing some flavor.
I think what we should understand is that as I said, it's Brian.
So early on today is that the net margin so us from B to B to B to C.
Is <unk>.
Significantly higher.
And directs a b to C.
Multiples higher so it has a very good.
The sooner we can drive the b to B to C business on the <unk> business, you will see significant margin enhancement.
Thank you.
Okay.
Yeah.
It felt like a major milestone C and the launch of Mad magpie According to certain people.
There were a large number of glitches.
With the App at launch in a complaint that was slow which I am pleased to say it was in contrast, with my own very positive experience.
I personally is healthy at 412 months faster than many of the other outside abused.
Are your own views on the performance and speed of Magnify App launch them now.
Yeah, I think there's a couple of things to bear in mind here.
The service we have to support her off a lot of people, where we had a number of complaints and speed, we're really dialing in from a long way away and all that sort of basis in and around Hong Kong All service I should say.
That said.
We have improved the speed of the up considerably considerably.
I think in my humble opinion, I believe you said, but worst as good as fast as anybody is out there.
Yes, perhaps you May think this is Julian just opinion I think you've certainly quicker than most people's outlet got everybody's out of that and I think the performance that we have the functionality on that dark mode came in over the weekend.
Which I think is a significant concern huntsman we expect.
For those overseas clients, who want you to onboard who will now.
That can start to go in place in the next week or so we called two or perhaps really.
And as a result of all of that now is the time and again as I said Bryan and then the other question today.
Now is the time for the next Blitz on the marketing push.
Thank you.
How the new user registrations on magpie and the number of transacting customers met your expectations.
Yes.
Yes, we as I said, it's been a very limited marketing scope pools for the reasons I again mentioned earlier.
But we are extremely extremely encouraged with the results of downloads and registrations as well.
And what we do in the target marketing that we have done on the tests and the instruction G. We've had in a number of different ways. It gives us so much valuable data on the things that work you dial up and those that don't you dialed out.
And so when we go into the next Blitz, hopefully we can.
You get a more effective dollar for marketing spend.
Right.
Thank you.
The share prices of <unk> and Tiger had fallen significantly over the past few months due to concerns around whether they are compliant with the relevant rules and regulations in China, including rules relating to licenses and also the new client data regulations, because that might CP compliant with all the relevant rules and does this give magpie competitive advantage over.
<unk> Tiger and others.
You'll be very careful what I say here I think an important thing to get across to everybody is that in being as compliance as we have been and continue to be.
In our opinion, we have followed many regulations and we're very proud at the level of compliance.
Corporate governance and the team have done an exceptional job in Hong Kong, an exceptional job of I'd say my hats off to them in that regard.
Does it give us a competitive advantage.
Im really not going to go there and spoke about other companies I think the important thing to discuss.
To get across is that we have built a world class App, that's improving and getting better all the time.
Uh huh.
A much better target specific marketing strategy going forward on Im sure that well I know because I.
Get sold all the time, but also some people about the assets we have at all marketing they'll see a lot of evidence in the next couple of weeks as we do on ex splits.
We're hopeful of the results and the outcome.
Yes.
Thank you.
It is disappointing that the launch of your commodity platform has been delayed can you elaborate on the reasons for the delay in the management of the vertical use this time to further improve its prospect.
Yes.
Well.
Just as I've said that we're very compliance.
And the stock trading App.
So we are in our insurance business, we are equally as compliance and anything we do and that includes in the commodities trading where we are seeing changes in regulation right now.
And we as we have announced some time ago partnered very significant organization.
And the feeling of the partnership is that whilst we have the change in regulation and particularly given the bulb facility. We have seen the oil and gas prices is I'd like to say unprecedented but it is once you the blue moon sort of stuff.
<unk>, which can sit back and watch what goes on then we will make a call as and when things become more clear.
But again it hasn't been in any of the analyst forecasts out there.
And it's still not in that so.
We're watching brief for the moment.
Thank you our final question the company share prices continued to perform poorly since last results statement and your market cap is barely above the value of the cash on your balance sheet. It would appear that the share prices are under the control of shorter and market makers.
With high levels of off market trading shortly you cannot be happy with this quarter is the company doing.
To tackle the shorter's and achieve a higher share price.
Okay.
Sure.
Nobody's happy of where the share prices clearly what can we do about it.
I think the important thing that we have to do as a company is what we've been doing and that has continued to execute and continue to deliver.
We build a world class license trading up.
Bill can scratch and insurance business, which is now going to run rate of <unk> $75 billion or so annually.
We have nationwide license coverages on insurance business, and 130 city provincial and city and town licenses on.
You can see from our results savings we are exceptionally proud of all we are well positioned that.
We have a shareholding in Israeli listed company that has.
Value when we have $105 million on the base.
Obviously, my focus is to keep delivering keep delivering shareholder value.
And the price.
Will sort itself out.
I hope.
Excellent.
That concludes the number of inquiries questions that we received I'll pass the call back to Tom our operator.
We still have time for questions from those dialed in on the phone. There is currently nobody in our question queue, but again, if you would like to ask a question Press Star then one to join the queue.
Sure.
Yes.
Yes.
We have a question from will Robertson. Please go ahead.
Part of that.
Just a point of clarification the moment, Mike Boy is focused on Hong Kong users will that be a point in time when Mac expects.
<unk> expects to accept users from mainland China.
Sure.
Not until the regulation is clarified note.
We work within the <unk> all.
The license in which we have in Hong Kong.
And.
Right now youre not permitted state mainland Chinese clients on so we will not do so we will focus as we have said it in the end.
The report today with over 2 million Hong Kong people, Hong Kong residents, who.
Trade.
On stock trading at a very multi price wars.
You can get a sizable portion of that all company will do exceptionally well.
Ill focus thereafter is on the Dias Chinese diaspora in other jurisdictions vitamin sounds like southeast Asia or other parts of the world.
The company is looking to do is increasing as licensed portfolio. So we can market and those appropriate values.
Yeah.
Okay.
Thank you.
Okay.
This concludes our question and answer session I would now like to turn the conference back over to Darin Mercer for any closing remarks.
Thanks.
I'd like to thank everybody for taking time today to join the call on for your ongoing support and I look forward to updating you on our year end results conference call and providing further progress updates.
Thank you all very much.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
[music].
Okay.
Okay.
[music].
Okay.
Yes.
Yeah.