(TIO) 2020 Q3 法說會逐字稿

Thank you. Good morning, and thank you for calling in to review MICT's third-quarter 2020 results. Management will provide an overview of the results. Importantly, there is a slide presentation, which management will use during their overview. This presentation can be found on the Investor Relations section of the company's website, www.mict-inc.com under Events and Presentations.

I will now take a brief moment to read the Safe Harbor statement. During the course of this call, management will express certain implied forward-looking statements within the Private Securities Litigation Reform Act of 1995 and other US Federal Securities laws.

These forward-looking statements include, but are not limited to those statements regarding our growth opportunities, whether organic growth or strategic acquisitions, future business, and financial results relating to timing of revenues and margins achieved in the fintech business, the potential size and demand in the markets in which we operate and Micronet's future ability to generate its revenues based on current leads and pilots.

Such forward-looking statements and their implications involve known and unknown risks, uncertainties, and other factors that may cause actual results or performance to differ materially from those projected. The forward-looking statements contained in this presentation are subject to other risks and uncertainties, including those discussed in the Risk Factors section and elsewhere in the company's annual report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission.

On the call this morning we have Darren Mercer, Chief Executive Officer and Board Member of MICT; and Arie Rand, Chief Financial Officer of MICT. Again, a reminder that management will be referring to a slideshow presentation that can be accessed via the Investor Relations section of the company's site.

We will start with an opening message from Darren, our CEO, who will give an overview of business developments for the three months ended September 30, 2020. Then we will move to review the numbers with Arie, our CFO.

I will now turn the call over to Darren, who will begin the presentation on slide 3. Please go ahead, Darren.

Thank you, and good morning, everybody. We are very pleased to complete the acquisition of 100% of Global Fintech Holding Intermediate or GFHI, giving us ownership of the platforms, technology, and businesses that GFHI has built in the global fintech space, with the initial focus on China's burgeoning fintech market.

We closed on $15 million in funding tied to the GFHI acquisition. In November, we closed on an additional $25 million through a registered direct offering. Our current significant cash balance enables the company to accelerate its immediate and significant growth opportunities in both insurance and stock trading divisions.

We've recruited top-class operational and management teams for both our insurance and stock trading divisions and made significant progress in our strategy of leveraging our technology and platforms, combining anticipated organic growth of our business along with strategic acquisitions.

Turning now to slide 4, we will review the developments in our insurance business. We are launching our online insurance platform in December of 2020 through a signed agreement with a high achieving management team assembled from China's largest insurance companies. This large team of industry-leading professionals, including the CEO, COO, and CTO, each of whom have 10 years to 20 years of experience, delivering significant revenues at very profitable insurance businesses in China.

We've incentivized the team to produce annual gross margins in excess of $10 million in year one on revenues of more than $250 billion and to deliver upon significantly higher targets in both years two and three.

China's market for insurance products is in its early stages of development and is already the second largest market in the world and forecasted to overtake the US by the mid-2030s. Online insurance premiums in China are forecasted to grow 41% per annum between 2019 to 2024. By 2032 total insurance premiums in China are estimated to reach $2.36 trillion, overtaking the US market by almost $1 trillion.

Let's turn to slide 5 for a review of our stock brokerage business. GFHI's significant database of active users and its ready-to-launch app-based technology platform are set to integrate a Hong Kong brokerage firm licensed to transact in substantial markets, including Hong Kong, the United States and China, including China's A-Shares.

We acquired an initial 9% stake in the Hong Kong securities and investment firm, with the balance of 91% to be acquired upon receipt of regulatory approval. The total purchase price is $3 million for 100% of the firm, which currently has approximately $2.1 million in cash and equivalents on its balance sheet.

We aim to be a significant player in the fast-growing retail investor market in China. Online stock trading volumes in China reached nearly $2 trillion in 2019 and are expected to continue to decline significantly in the foreseeable future.

With strong technology, an excellent management team, and a significant database, MICT is very well poised to benefit from this burgeoning market with revenues expected to start shortly after approval from the Hong Kong Securities and Futures Commission to complete the acquisition.

On slide 6, we will review the developments in our Micronet telematics business. Following our acquisition of more than 50% ownership in the outstanding ordinary shares of Micronet Ltd. in June of 2020, in accordance with US GAAP, MICT is reporting the revenues and financial results of Micronet in the third quarter of 2020.

We are supportive of Micronet transitioning its business from hardware sales to a higher margin recurring revenue model with sale of artificial intelligence, AI, and software as a service; SaaS based products. SmartCam is now being piloted with numerous customers, any one of which may result in substantial contracts that may materially impact the business.

SmartCam integrates advanced software and AI functionality to serve the fastest growing segments of the estimated $45 billion global telematics markets. Micronet received its first major order for SmartCam following a successful pilot trial with a leading global telematics provider.

As this customer is a major telematics provider, this order may lead to substantial orders in 2021. Additionally, Micronet received initial orders for our SmartCam hub and SmartTab 8 tablets from one of the largest automotive OEM truck manufacturers in Europe.

This brings significant revenue potential from a broader commercial agreement that Micronet is negotiating on plans to sign with this new OEM customer. This marks Micronet's entry into the OEM automotive manufacturing markets, opening opportunities to sell directly to OEMs, in addition to its current distribution channels through telematic service providers.

On slide 7, we will go over top-line financial results for the third quarter. As a reminder to all, between February 24, 2019, and June 23, 2020, MICT held less than 50% ownership of Micronet's outstanding ordinary shares, and therefore, did not include Micronet's financial results during that time in its consolidated financial statements based on US generally accepted accounting practices. Revenues were $349,000 in Q3 of 2020 as compared to $0 in Q3 of 2019. Gross profit of $2,000 in Q3 of 2020 as compared to $0 in Q3 of 2019.

Research and development, R&D expense was $230,000 in Q3 of 2020 as compared to $0 in Q3 of 2019. Selling, general, and administrative expense, SG&A in Q3 2020 was $4.96 million as compared to $501,000 in Q3 of 2019. Net loss attributable to MICT was $14.15 million in Q3 of 2020 as compared to $1.2 million in Q3 of 2019. As of September 30, 2020, MICT had $18.6 million in cash.

I will now turn the call to Arie for a more detailed financial review.

Thank you, Darren, and good morning, everyone. The next slide illustrates the revenues for the three and nine months ended September 30, 2020, as compared to the same period in 2019. As a reminder, MICT's financial results for the nine months ended September 30, 2019, reflects Micronet Ltd. revenues for the months of January 2019 and February 2019 only.

Revenues were $349,000 in the third-quarter 2020 as compared to $0 in the third-quarter 2019. Revenues for nine months ended September 30, 2020, were $349,000 compared to $477,000 in the same period of 2019.

Slide 9 provides a more detailed breakdown of the third quarter and nine months ended September 30, 2020, as compared to the 2019 numbers. Total operating expenses in the third quarter 2020 were $6 million as compared to $501,000 in the third quarter of 2019.

Loss from operations was $6 million in the third quarter 2020, as compared to a loss from operation of $501,000 in the third quarter of 2019. Net loss attributable to MICT in the third quarter of 2020 was $14.2 million or $0.61 per basic and diluted share as compared to a net loss of $1.2 million or $0.11 per basic and diluted share in the third quarter of 2019.

Turning to slide 10, we provide non-GAAP results for the third quarter. Total non-GAAP net loss attributable to MICT in the third quarter 2020 was $1.6 million as compared to $1.2 million in the third quarter of 2019. On a per share basis, non-GAAP net loss attributable to MICT in the third quarter 2020 was $0.07 per basic and diluted share as compared to a non-GAAP net loss of $0.11 per basic and diluted share of third quarter 2019.

On slide 11, we provide non-GAAP results for the nine months ended September 30, 2020. Total non-GAAP net loss attributable to MICT for the nine months ended September 30, 2020, was $2.5 million as compared to $3.2 million in the 2019. On a per share basis, non-GAAP net loss attributable to MICT for the nine months ended September 30, 2020, was $0.16 per basic and diluted share as compared to a non-GAAP net loss of $0.30 per basic and diluted share in the same period of 2019.

Turning to slide 12 on our balance sheet, we have $18.6 million in cash and cash equivalents, $1.1 million in bank and other debt; and $16.1 million in net working capital, and $59.8 million (sic see Presentation, "$52.8 million") in shareholders' equity as of September 30, 2020.

I will now turn the call back to Darren.

I'd like to thank our shareholders, who overwhelmingly approved our plan to acquire GFHI and enter the fintech market through their proxy votes. The acquisition and funding positions MICT to get to market quickly with our insurance and stock trading platforms.

While our revenues in the third quarter represents only our telematics operations, we expect to book revenues from our global fintech business before the year end. Significant cash on our balance sheet, coupled with the immediate business opportunities at hand position MICT to make rapid progress from the end of this year into next year and beyond.

Thank you for getting on the call, everybody. Have a good day.

Thank you. This concludes MICT, Inc. third-quarter 2020 results conference call. Thank you for your participation. You may go ahead and disconnect.