(TIO) 2020 Q4 法說會逐字稿

Thank you. Good morning, and thank you for calling in to review MICT's fourth 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 and 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. These 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 and Form-10K for the year ended December 31, 2020, 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 Moran Amran 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 CEO, Darren Mercer, who will provide an overview of business developments for the three months ended December 31, 2020. Then we will move to review the numbers with Moran Amran.

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. Slide 3. We have made significant progress in 2020. Pivotal to that progress was the acquisition of Global Fintech Holdings Intermediate or GFHI in July of 2020. That acquisition facilitated our ability to transition our business focus from the telemetry business to the rapidly growing fintech market throughout Southeast Asia, particularly China.

The acquisition provided us with a proprietary technology platform and together with a database of several million users that are actively trading stocks and other financial securities in China opened up a significant marketing opportunity for the company. This has been the key driver for all of our activities since, and created the opportunity to markedly strengthen our balance sheet.

Within the fintech space, we are currently focused on three key verticals, namely insurance, online stock trading, and the commodities trading on futures markets, all with an emphasis in these activities in Asia with a focus on China. During October, we began acquiring a strategically significant Hong Kong-based broker-dealer that ultimately provided us with a license platform in Hong Kong, to accelerate our entry into the stock trading markets.

Additionally, in late December and ahead of schedule, we launched our insurance platform in China, which has experienced strong acceleration since. This has been supported in part by a number of key brokerage insurance partnerships, also signed in December.

If I can now turn your attention to slide 4. The Chinese insurance market is still in its infancy with a penetration rate of less than 5%. Only 24% of insurance premiums in 2019 were from online sales. In 2017, total insurance premiums in China were $530 billion, with non-life accounting for $147 billion and life premiums accounting for $383 billion.

By 2032, total insurance premiums in China are projected to reach $2.36 trillion. Online insurance premiums are expected to experience strong growth with a CAGR of 41% from 2019 through to 2024.

If you can now turn to slide 5. During the fourth quarter, we launched our insurance business in an effort to capitalize on this rapidly growing market in China and did so ahead of schedule, allowing us to reap the benefits of the revenue generated at the end of December, which was $299,000 to enhance our financial position to close out 2020. Our strategy is to establish nationwide partnerships across all product lines and reach the widest possible customer base.

To facilitate our key commercial relationships in the Chinese insurance sector, our acquisition of Beijing Fucheng Insurance Brokerage Company or Fucheng in February 2021 provides us with a valuable nationwide license that allows us to offer insurance brokerage services for a broader range of insurance products as well as the flexibility to create tailor-made insurance products that can be promoted to South China and Southeast Asia's biggest online portals consisting of both B2B2C and direct B2C channels. With these channel providing the opportunity for higher margins than a B2B model.

Through these partnerships, we will also acquire valuable customer data that will ultimately be utilized to cross-sell other high-margin products directly and to utilize their data to identify opportunities in our other business lines. We recruited a first-class management team from South China's largest insurance companies that are heavily incentivized to succeed. This includes more than 25 high-performing professionals from China's largest insurance companies, each with the vast knowledge of the market.

Included in the management team for the insurance division is a CEO, COO, and CTO, each of whom has a 10 years to 20 years track record of leading sales operations and technology development. We are delighted with the considerable progress our insurance business has achieved and expect that momentum and growth to continue in the second quarter and beyond.

If I can now turn your attention to slide 6. The online stock trading market in China is large and growing rapidly. Online stock trading volumes quadrupled in 2019, growing to $1.8 trillion, up over 300% from the prior year. China is currently the largest online securities market, accounting for over 40% of global online trading volume.

The growth in China is being driven by regulatory changes as well as the country's economic growth and developments. Our target market for the stock trading business is primarily the millennials and Generation Zs, which represent the fastest growing segment of the market.

If I can now turn your attention to slide 7. In October of last year, we entered into an agreement to buy a Hong Kong securities and investment firm, Huapei, which provided a license to enable our registered users to trade securities across many global stock exchanges. Our initial focus will be the United States and Hong Kong.

Post-HK SFC approval to acquire all 100% of Huapei, we move quickly to sign contracts with key data feeds and other commercial relationships that will improve the functionality of our and will ultimately provide our end users with what we believe will be a platform with a competitive advantage. Our decision to invest and continue to develop our own proprietary technology rather than adopting a white-label solution from another platform allows us in our view to one, achieve greater margins; two, maintain 100% ownership of the vitally important registered user data; and three, provides us flexibility to adapt, modify, and update the platform as we see necessary in response to market changes.

It is our opinion that this approach will provide much greater underlying shareholder value. We intend to deploy a multilayered marketing initiative to attract registered users to our platform. This should include accessing our already considerable database, a social networking strategy, and accessing the considerable number of registered users on the platforms of some of our key corporate partners.

If I can now turn your attention to slide 8. We also recently entered the China oil and gas commodities market, in which crude oil and natural gas plants have the China oil and gas commodity market in which crude oil and natural gas commodity imports represent $259 billion and $44 billion, respectively.

In February 2021, we entered into a strategic partnership with Shanghai Petroleum and Natural Gas Trading Center, whose customers account for approximately 20% of China's oil and gas trading. Under this agreement, we will act as a third party partner to the exchanges clients to provide trade execution, margin financing, and trade clearing capabilities. The initial focus is on services for clients, trading futures and commodities contracts. We expect this product to launch at the very end of Q2.

If I can now turn your attention to slide 9. As I've already stated, our focus is now in and around the fintech arena in Southeast Asia. Whilst the Micronet business is no longer core to that strategy, I do believe that our investments in Micronet being worthwhile and is now beginning to show promise in the telematics industry. Micronet generated continued activity in Q4 with a $300,000 order. We have seen some traction with a significant follow-on order for one of the world's largest telematics service providers for 5,000 SmartCam units, valued at $1.5 million for the recent additional order for $900,000.

Micronet's highly innovative video telematics SmartCam products integrate advanced software and artificial intelligence functionality to serve one of the fastest growing segments of the global telematics market. The recent momentum in the Micronet business provides promising sign for the SmartCam technology may lead to additional revenue growth in 2021 and beyond.

If I can now turn your attention to slide 10. We had a strong liquidity position with a cash balance at the end of the fiscal year of $29 million. In addition, we raised gross proceeds of $60 million in February 2021, and an additional $54 million in March 2021. The two capital raises in 2021, totaling $114 million, provide us with a strong financial platform to enable us to pursue our growth strategies in all of our business verticals. In particular, which I've already mentioned, our insurance businesses performed well during the first quarter of 2021 and is continuing to grow.

Additionally, we intend to provide when we launch our stock trading app, a margin finance capability without which we would be at a significant competitive disadvantage. At this time, I'm pleased to turn the call over to Moran to review our quarterly and year-end numbers.

Thank you, Darren. The revenue in the fourth quarter benefit significantly by the insurance division, which launched in late December and contributed in excess of $299,000. Gross profit was negative $60,000, divide by an increase in cost of revenue. In the fourth quarter, our investment in R&D was $254,000, an increase from $6,000 in the year ago period. This increase was due to investment made as we entered the China fintech market.

General and administrative expense increased to $7.9 million, up from $866,000 in the prior year, as we increased spending and acquired a support our new fintech business. Total net loss in the first quarter was $7.6 million, as compared to a loss of $966,000 in the fourth quarter of last year. Back to you, Darren.

Thank you, Moran. In conclusion, 2020 was a pivotal year for MICT, where we made the transition from telemetry to fintech in the Asian markets and a focus on China and establish a significant cash balance to execute and support our internal and external growth strategy. Our insurance business started strongly, following an encouraging launch in the fourth quarter of 2020, and we continue to see those revenues grow.

Additionally, we are excited about the impending launch of both our proprietary stock trading platform, driven by an innovative and targeted marketing strategy and our commodities and futures trading platform, which is supported through our unique relationship to the major force in the Chinese oil and gas industry. It cannot be understated how strong our cash position currently is. And the considerable assistance it provides to fuel the company's growth. Both the insurance division and stock trading division has significant resources to support their --