Logiq, Inc.
Q4 2020 Earnings Call Transcript

Published: 30 Mar 2021

[Operator:]

Good afternoon and thank you for joining us today to discuss Logiq’s Fourth Quarter and Full Year Ended December 31, 2020. Joining us today are Logiq’s President, Brent Suen; and its Chief Executive Officer, Tom Furukawa. They are joined by the Company’s Financial Officer of Company’s DataLogiq subsidiary, Rod Granero. Following their remarks, we’ll open the call to your questions. And before we conclude today’s call we’ll provide some important cautions regarding forward-looking statements made by management during the call. I’d also like to remind everyone that today’s call is being recorded and it will be made available for telephone replay following the instructions provided in today’s press release. I’d now like to turn the call over to Logiq’s President, Brent Suen. Sir, please go ahead.

[Brent Suen:]

Thanks, Allie, and good morning or good afternoon to everyone. Thanks for joining us today. We hope everyone has been staying healthy and safe as the end to the pandemic is finally in sight, knock on wood. Thanks to now three real vaccines. Despite the tremendous impact of the pandemic on our business and certainly multiple others, thanks to our new DataLogiq subsidiary, in 2020, we increased revenue by 9.4% to $37.9 million. Consolidated gross profit for the full-year also increased by 2% to $6.4 million or 16.8% of consolidated revenue. Most remarkably, we saw gross margins for our AppLogiq business, formerly known as CreateApp, improved every quarter of 2020, despite being at the height of the pandemic, which in Q2 was at 11.8%; Q3, we were at 12.4%; and then in Q4, we achieved 25.6% gross profit margins, which for us was quite exciting. This was the result of eliminating low margin, white label partnerships that were also impacted by the pandemic, and focusing on the most profitable segments that we serve with our mobile app business enablement platform. This has been a certain pain point for us since we started out six years ago as some of the early white label partnerships plus the lack of a strong digital marketing platform kept our gross profit margins down around the mid teens. So, an improvement up to the mid-20s, which we also expect to continue to trend higher, is again very exciting for us. While this margin improvement is very encouraging, we’re actually more excited about our future margin prospects, particularly for our e-commerce business of DataLogiq and our recent strategic acquisitions. For those of you who know, over the past year, we acquired three e-commerce platforms as we expanded our global presence. Our product offerings now extend from mobile commerce enablement and fintech solutions for small to medium size businesses or SMBs all the way to artificial intelligence or AI-powered customer acquisition for major enterprises and brands. Historically, our goal was to help companies get their businesses online. However, the biggest challenge once online is getting new customers to find you and existing customers targeted products that are specific to their wants and needs. How can that be done without relying upon Google or Facebook or expensive advertising campaigns that don’t get to the exact target customers you want? But just this morning, we announced that we have completed the acquisition of Rebel AI, which is an innovator in digital marketing solutions that delivers e-commerce growth to both, brands and agencies. Rebel complements our new Fixel AI unit that we had introduced on our last call. Fixel added simplified marketing and critical privacy features to our AI-powered consumer intent engine Push, which is used by major brands and premium publishers.

[Rod Granero:]

Thank you, Brent. Earlier today, we issued a press release for the results of our fourth quarter and full year 2020. A copy of the release is available from the Investor Relations section of our website. We manage our business on the basis of our two reportable segments, mobile commerce enablement or our AppLogiq platform-as-a-service and our DataLogiq consumer data management platform that delivers lead generation, online marketing and multi-channel strategies through its own and operated brands and our newly acquired AI-powered audience scoring and segmentation platform. Now, let’s start -- now starting with our statement of operations for the fourth quarter of 2020. Our consolidated revenues totaled $6.6 million, which declined 34% from the same quarter a year ago. The decrease was mostly due to AppLogiq’s decreasing revenues offset by the addition of DataLogiq’s revenues, which we’ll cover in more detail. In Q4 2020, our AppLogiq platform contributed $2.1 million or 32% of consolidated revenues in the fourth quarter. This was a decrease of 79% as compared to $10 million or 100% of consolidated revenues in the same period a year ago. The decrease was primarily due to the impact of COVID-19 lockdowns, as well as the transition to lower revenue, but higher margin business as Brent mentioned. In contrast, our DataLogiq segment has experienced continuous growth sequentially and quarter-over-quarter in both revenue and customer growth, and this has helped diversify our revenue streams and offset the challenges with AppLogiq.

[Tom Furukawa:]

All right. Thank you Rod, and thank you all for joining us today. 2020 was a major transformative year for Logiq in many ways. We successfully executed on our plan for improving AppLogiq margins and the quality of its revenue as we also improved both revenue and margins for our newly acquired DataLogiq subsidiary, all amidst the height of the pandemic. Thanks to DataLogiq’s inherently agile e-commerce platform, we were able to quickly identify emerging market verticals that was being driven by the pandemic impact such as home improvement and Medicare. This enabled us to generate strong sales growth and margin expansion, despite the lockdowns and other COVID factors affecting the general economy. In fact, as Rod mentioned, we beat the revenue and margin goals that we had set early in the year, hitting record gross profit in Q4. And for the full year, we hit record margin of 17.8%, up from 14.8% in 2019. The margin improvement was largely due to our focus on data monetization and being able to quickly identify and pivot to the hottest market verticals.

[Brent Suen:]

Thanks, Tom. Very exciting stuff. I’d like to talk a little bit about our progress with the NEO IPO and then provide an update on our mobile commerce and fintech initiatives in Indonesia. NEO, as most of you know, back in October, we initiated the application process to have our common shares listed in the NEO exchange, Canada’s next generation stock exchange. Last week, we finally received conditional approval to list in the NEO in connection with our previously announced proposed initial public offering. We’re currently coordinating with the NEO to ensure the remaining conditions are met, which includes responding to final comments, selecting the designated market makers and setting the listing date. The conditional approval indicates that we are on track to seeing list on the NEO. And you may wonder why, why the NEO? So, as a senior exchange, the NEO exemplifies how state-of-the-art exchange trading technology can help increase investor confidence, improve liquidity and elevate a company’s global profile. They currently account for around 25% to 30% of the total trading volume in Canada. And actually, since we began the process in October, the NEO has already doubled the number of corporate listings, including some very exciting technology companies that are listed on both, NASDAQ and the New York Stock Exchange already. Upon listing on the NEO, our shares would continue to trade in the U.S. on the OTCQX. However, the listing on the NEO represents an opportunity to rapidly move our U.S. trading to the New York Stock Exchange Annex platform and become dual listed on two recognized exchanges in both Canada and the U.S. We’re very hopeful to announce the NEO IPO and trading dates very soon. Comviva

[Operator:]

Thank you. And we’ll go ahead and take our first question from Lisa Thompson from Zacks Investment Research. Please go ahead.

[Lisa Thompson:]

So, Brent, I’m going to put you on the spot. Previously, you had discussed guidance of like $43 million to 45 million in revenue and gross margin of 35%. Is that too specific anymore, or do you have different thinking on that?

[Brent Suen:]

Internally, that’s what our targets are. We feel quite comfortable with the margin level, well into 2022, which I know you didn’t ask about. We believe that will improve well beyond that as well. On the revenue side, I think that’s a comfortable target. However, what we are focusing more on is the margin improvement.

[Lisa Thompson:]

Okay. And so, I want to try to understand Q4 little bit. There was a lot of additional spending that probably I didn’t expect. I assume, in there somewhere is some one-time thing, and that’s not your base spending level. Can you talk about that little bit?

[Brent Suen:]

We did have a number of onetime items.

[Lisa Thompson:]

And can you quantify that or no?

[Brent Suen:]

I would probably need Lionel or Rod to do so. Rod, if you’re able to do so, that’d be great. If not, we can surely connect offline.

[Rod Granero:]

Yes. I don’t have readily available in front of me, but that’s something that we can definitely look into. I mean, I know there’s going to be some acquisition-related amounts related to Fixel and part of Rebel, as well as the IPO. So, those will be some of the one-time items. But also to your question, with that addition of DataLogiq in 2020, that also significantly increased the operating expenses on a consolidated basis.

[Lisa Thompson:]

So, should I expect then expenses to be down in the first quarter sequentially?

[Rod Granero:]

I’m sorry. Could you repeat that question?

[Lisa Thompson:]

Should I expect expenses to be down sequentially in Q1?

[Rod Granero:]

Yes. They should go down slightly, because we won’t have this one time item that we incurred in Q4.

[Lisa Thompson:]

Okay. And then, it goes -- and starts back up again, as you add in Rebel, correct?

[Rod Granero:]

That’s correct. Yes.

[Lisa Thompson:]

Okay. I want to kind of understand the seasonality in the business. Is Q4 a seasonally high quarter, or do you think that your growth will compensate that and you’ll expect each quarter to be up sequentially?

[Tom Furukawa:]

Rod, do you want to cover it on the DataLogiq side? Then I can speak to the AppLogiq side.

[Rod Granero:]

Yes. So, for DataLogiq, we’ve seen growth quarter-over-quarter since -- basically since Q2. I mean, we had a little bit of a slowdown because of the transition and with the pandemic happening, but we’ve experienced growth every quarter since. We expect continued growth in Q1 based on some of the results that we’ve seen to date. And then, yes, I think given some of the strategic acquisitions that we have, we believe that we have some of the synergies that we’ll be able to have in some of the new acquisitions. We’ll be able to continue that trend quarter-over-quarter of increase going into 2021.

[Lisa Thompson:]

Okay, great. So, Tom, are you going to comment about DataLogiq?

[Rod Granero:]

AppLogiq.

[Tom Furukawa:]

Yes. So, Lisa, I think -- sorry. Just to follow on to Rod, in terms of the digital advertising industry, Q4 is really where you make your big revenue. And so, none of our strategy this year we’re starting today, we start to get these agencies onboard Logiq Digital Marketing, and get them start to spend in which you’ll see the quarter-to-quarter revenue increase, but really get them set up for the big buying seasons in advertising. So, that’s more of the color around Rod’s comments there.

[Lisa Thompson:]

So, does that mean DataLogiq will be below $4.5 million in Q1?

[Rod Granero:]

No. For Q1, we don’t have final numbers yet. But we believe that -- we continue some of the growth and the momentum that we had in Q4. But as Tom mentioned, usually towards the end of Q1 beginning of Q2, we start kind of like the setup process and we usually see a little bit of a dip in Q2, and then start getting a momentum going into Q3. And as Tom mentioned, Q4 usually tends to be our higher revenue quarter in terms of net revenues for DataLogiq.

[Lisa Thompson:]

Okay. So, it sounds like this was the worst quarter, and then everything should be improved slightly as things go on. Is that correct?

[Brent Suen:]

Yes. That’s correct. In addressing the AppLogiq side, what we saw in Q2 was a direct effect of COVID. However, at the same time, we were also beginning the process of focusing more on higher margin, digital and direct marketing. So, throughout Q2 and -- I’m sorry, throughout Q3, and the first part of Q4, we had wintered that down to where we eliminated the lower gross margin business. And although you saw our trend down from Q1 to Q4, you will start to see that track back upwards and you’ll see margin expansion track alongside it.

[Lisa Thompson:]

Okay, great. And just a question on Indonesia, have you started booking any revenues there for these new initiatives? And if not, when?

[Brent Suen:]

We have not. We’re a little bit behind on the local audit there, mostly because of the lockdowns and also the way that the local auditors are going to treat it going forward. We expect to launch the micro lending part of the business in Q2. And we are also embarking on several strategic initiatives with our partner and several others that we believe can kick in, in Q3 and certainly Q4. So, we should be expecting some contribution throughout this year.

[Lisa Thompson:]

Okay, great. That’s helpful. I’ll let somebody else ask questions. Thank you.

[Brent Suen:]

Thanks, Lisa.

[Operator:]

And we’ll go ahead and take our next question from Chris LaCoursiere. Please go ahead.

[Chris LaCoursiere:]

Hi, guys. Amazing transformation of the Company over the past nine months. It’s actually mind blowing. Great job, Tom. And I just want to say thank you to Tom and also Mr. Hartman for their comments and the analysis I released on Seeking Alpha. My question is, maybe Brent can answer this. On YouTube yesterday there was a beautiful ad put out by the Company on the acquisition of Rebel AI and the transformation of the Company. Now, additionally asked you some market institutional investors is it to get new clients, and how are we going to get it out there?

[Brent Suen:]

Let me address part of the question and then I can let Tom speak to it. I think, the main goal behind that is to start to present faces of the Company explaining what it is that we do and how it helps small businesses play on it on a greater scale and on a level playing field with companies such as Amazon and Walmart and the e-commerce giants that currently account for such a large percentage of e-commerce spending. As far as the scope of investors that we’re targeting, I think, it will resonate well with those individual investors, as well as institutional investors. We have clearly embarked on an industry that is not well-known in terms of people being able to know all the company names that are in the ad tech and market space. There are a few clear leaders such as the Trade Desk and Magnite, but there’s also probably another 15 to 20 that are publicly traded that have done significantly well. But they’re mostly institutional favorites. It would be great for individual investors to hopefully better understand what it is that we’re doing, sort of wade through all of these buzz words and all the jargon and be able to boil it down and say, oh, I get it. That does make sense. There’s a huge need for that. And Logiq is addressing it. Tom, do you want to fill in some added color.

[Tom Furukawa:]

Yes. And Chris, is your question kind of part of like I guess go-to-market or customer acquisition strategy.

[Chris LaCoursiere:]

Yes. My question is the video, and I don’t even know if many people saw it. I didn’t see it myself until yesterday. And it’s a beautiful marketing tool the Company put out and it really full circles what you guys are doing, a paradigm change and marketing to small businesses to level the playing field, as you said. So man, with that video out there, how do we do it? Do we extend co-op…

[Tom Furukawa:]

Yes. We’re doing a major marketing push today. So, you’ll see that everywhere. And the nice thing about that is it features a really good customer that if it’s a characteristics of this 500,000 businesses in the U.S that are struggling, right? That’s basically getting coupled by the top 70%. And it’s companies like that will be able to reach out to -- the one thing that we haven’t talked too much about is, we are building apps and we’ve launched a few things on the Shopify platform, and we’re starting to see traction there. So, Shopify, WordPress, BigCommerce, and newCommerce, all of these amazing e-commerce platforms where today it’s so easy, right, to put a store online. And it’s really engage customers to your online store. That’s where it gets tough. And that’s a problem we’re solving for now. The other thing too, just to note is, between Steve Hartman, myself and then Manny from Rebel, we have -- each of us have over 15 or more years in advertising technology. And we all kind of grew up in this industry together. And we know a lot of people collectively in this industry. And so, all of those types of things and conversations and text messages and LinkedIn messages are taking place. And for me the roll out is really going to be strategic so that we can have good growing customers on the platform, and we can continue to bolster our customer support and onboarding, so we can have a great experience on our platform and really help these small businesses grow. And that’s going to be a key part of our strategy and our investment this year.

[Chris LaCoursiere:]

Great. Thank you so much. And thank you again, Tom, for taking the time to talk to me and comment on my analysis for Seeking Alpha.

[Tom Furukawa:]

Yes, my pleasure. Great article. Thank you for doing that.

[Operator:]

And we’ll go ahead and take our next question from Tony Forte . Please go ahead.

[Unidentified Analyst:]

Brent, can you briefly discuss the significant undervaluation of LGIQ in relation to its peers? And do you believe the move to the NEO and eventually to NYC will change that?

[Brent Suen:]

Sure, sure. Yes. That’s something we’ve obviously been both struggling with and certainly aware for a number of years. I think, any way you view our valuation, there’s a disparity between our valuation and other e-commerce enablers. If you look at the evolution of the business and how the ad tech, martech platform that Tom and team are building, and look at peers in that space, we are equally undervalued. Speaking to the e-commerce enablers, certainly one of the things that has existed over the years has been depressed gross margins. Whenever we’ve gotten in front of institutional investors, there is critique around our relatively low gross margins, which I believe we’ve done an excellent job at improving in Q4 of last year and certainly going forward. I believe though that when you start to see institutional investors speak with management start to better understand the three components of the business that have been put together, including Push, DataLogiq, Fixel AI and now Rebel AI and how they wrapped together, and then the target markets that we’re going after and why we believe that we will dominate that market. I think that you will see a narrowing of that gap hopefully in our favor. Again, getting the market awareness out there is dependent upon being on an actual exchange, not just the over the counter market. So, I think the NEO listing will be a significant step forward. And then, again, we are intent upon up-listing onto the NYSE later in the year.

[Unidentified Analyst:]

Well, thank you very much, Brent. Do you believe that the listing on the New York Stock Exchange can be done now within a month or two we are listed on NEO?

[Brent Suen:]

That might be a little aggressive. The timeline that they’re speaking to us about that standard is around 10 to 12 weeks all in from submitting the application, and it could be less. I believe that once you’re on track and investors are aware of that, you would certainly get more attention.

[Unidentified Analyst:]

Thanks, again, Brent.

[Brent Suen:]

Thanks, Tony.

[Operator:]

And it appears we have no further questions at this time. With that, that does conclude our question-and-answer session. I would now like to turn the call back over to Mr. Suen. Please go ahead.

[Brent Suen:]

Thanks, Allie. I’d like to thank everyone for taking the time to join us for our call. And if you can take away one thing from the discussion today, I hope it’s the understanding of the incredible opportunities ahead of us and our ability to generate value for customers and subsequently shareholders by creating long-term sustainable growth. Beyond the numbers, I hope that you can see that we have endeavored to create a culture that is dedicated to doing something of value and creating a strong foundation for growth this year and beyond. Allie, please go ahead and wrap up the call.

[Operator:]

Thank you. Before we conclude today’s call, I would like to provide the Company’s safe harbor statement that includes important cautions, forward-looking statements made during today’s call. Statements made by management during today’s call have contained forward-looking statements within the definition of Section 27A and the Securities Act of 1933, as amended and Section 21E at the Securities Act of 1934 as amended. These forward-looking statements should not be used to make an investment decision. All statements, other than statements of historical fact included herein, are forward-looking statements, including statements regarding the ability of Logiq to successfully complete any up-listing process, the fitness of Logiq’s products and services for a particular application or market, the ability to effectively integrate Rebel AI into our business operations, the continued growth of e-commerce segment and the ability of the Company to continue expansion into that segment, the ability of the Company to attract customers and partners and generate revenues, and the ability of the Company to successfully execute its business plan, the business strategy, plans and objectives of the Company and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology, such as believes, expects or similar expressions and involve known and unknown risks and uncertainties. Although, the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this conference call. The Company’s actual results could differ materially from these anticipated in these forward-looking statements as a result of a variety of factors, including discussed in the Company’s periodic reports that are filed with the Securities and Exchange Commission and available on its website at www.sec.gov. All forward-looking statements attributable to the Company or persons acting on its behalf are expressively qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume any duty to update these forward-looking statements. Before we end today’s conference, I would like to remind everyone that this call will be available for a replay starting later this evening. Please refer to today’s press release for dial-in replay instructions available via the Company’s website at www.logiq.com. Thank you for joining us today. This concludes today’s conference call. You may now disconnect.