Logiq, Inc.
Q3 2022 Earnings Call Transcript

Published: 15 Nov 2022

[Brent Suen:]

Good morning, and thank you for joining us today to discuss Logiq's Financial results for the third quarter of 2022, ended September 30. Following prepared remarks, I'll open the call to questions. And I'd also like to remind everyone that today's call is being recorded and will be made available for telephone replay in the next day or so on our IR web tab. So first, while a few more people are joining us, I will read the obligatory safe harbor statement regarding forward-looking statements made by management during today's call.

[It's a little lengthy, so please forgive me here. This teleconference contains certain forward-looking statements and information as defined within the meaning of Section 27A of the Securities Act of 1933, as amended in Section 21E of the Securities Exchange Act of 1934, as amended, and the subject to the safe harbor created by those sections. This teleconference may also contain forward-looking statements and forward-looking information that relates to Logiq's current expectations and views of future events.:]

[Any statements that express or involved discussions as to expectations, beliefs, plans, objectives, assumptions or future events or performance often but not always through the use of words or phrases such as will likely result, are expected to, expect, will continue, is anticipated, anticipates, believes, estimate, intends, plans, forecasts, projections, strategy, objective and outlook are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties, which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements.:]

[No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this call should not be unduly relied upon. These statements speak only as to the date of this teleconference. Forward-looking statements are based on a number of assumptions that are subject to a number of risks and uncertainties, many of which are beyond Logiq's control, which could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking statements. Logiq undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.:]

[New factors emerge from time to time, and it is not possible for Logiq to predict all of them or assess the impact of such factor or the extent to which any factor or combination of factors may cause results to differ materially from those contained in any forward-looking statements. Any forward-looking statements contained in this conference call are expressly qualified in their entirety by this cautionary statement. Listeners are encouraged to read full details of the company's quarterly financials at no cost at www.sec.gov.:]

[We are at an important juncture today. What we like to call the infamous inflection point. We believe that our best news and growth trajectory, which is actually subsequent to the close of the third quarter is now and directly ahead of us. A few points that I want to highlight. The Battle Bridge acquisition, which we completed back at the end of March of this year, is paying off very well as we had hoped, which I'll describe in a moment. One of the results of that, is that on November 8, we announced a new client, which we are currently seeing generating $2 million to $3 million per month.:]

[This is in a regulated industry, which we have described before. We are intent upon pursuing and are doing so. I will also describe the pending acquisition of our DataLogiq business or what we're using the acronym of DLQ by Abri SPAC 1. We filed with the Securities Exchange Commission recently, and we expect to hear back from the SEC shortly on the timeline for what's called going effective and moving towards the proxy vote. My personal timing is early January for completion. And then there is one other significant event that I will describe later on the call. On the first 2 points regarding Battle Bridge, our Head of Sales, who is not with us right now on the call, Travis Fipps, he has been pursuing this new client for over 1 year.:]

[And just a few weeks ago, we secured them. Revenue is currently tracking at about $2 million to $3 million per month. What I would point out is that we have been saying since Q1 and 2 that we are looking to exit the year on a run rate of $40 million to $50 million. This does put us on track to doing so. This particular client being in a regulated vertical market and others like it, which would be cannabis CBD, eSports is one, online gambling, and crypto. Marketing and advertising in those industries is highly regulated. It requires very sophisticated ad tech and compliance expertise.:]

[So therefore, this particular client is predominantly in that regulated market and seeks such services. Hence, our ability to secure them and what we believe to be several others shortly. Our other larger prospective clients in our pipeline are also in regulated markets, and we believe this demonstrates a degree of success in executing on our previously announced directional change towards regulated markets and eventually higher margin business. There will be a similar new business contract, not nearly as large as this one, but we're quite confident we will be closing and announcing within the next 30 days.:]

[Again, this is in a regulated industry. A couple of other items to note. In September, we entered the roofing market and also the residential and commercial EV charger installation market. Now some people have actually reached out to me concerned that we were going into the physical roofing market, which is tremendous in terms of business. But no, we are sticking to the digital services that we're in and connecting people who are in the roofing industry to prospective customers. That is what we do. If you see an announcement that we're going into a new industry, it doesn't mean that we were actually doing it, but we are helping enable businesses and brands in set industry and connecting them with clients.:]

[We remain very opportunistic to continue to capture market share of other attractive verticals while also reinforcing our market position in our existing verticals. Operationally, since the November $2 million to $3 million monthly contract closed subsequent to the third quarter, I'm not going to bore you with all the financials that you've already seen and were posted this morning. But some quick highlights from Q3. Consolidated revenue of $3.8 million is up $0.5 million sequentially from the prior quarter of Q2 and down $1.2 million from a year ago.:]

[Consolidated revenue was $4.1 million. That includes approximately $400,000 from 100% of GoLogiq, which we distributed, 87.8% of the shares to shareholders on July 27, while Logiq Inc. still owns 12.2% of those shares. Going forward, in Q4, gross margin was up 240 basis points year-over-year and the consolidated net loss was $7.7 million. Regardless of the increased revenue run rate as expected before year-end in order to boost operating margins and consistent with an approach to streamline financial and operational management.:]

[We've done a couple of things. One thing we've done is we've shrunk our lowest margin, smaller account client base, so we can focus our resources on serving and building an increasingly larger and higher-margin client base. It does take nearly as much time and resources to service the small accounts as it does the larger ones. Some of you all might remember that we undertook the same initiative in 2020 during COVID, and we were successful in doing so, we believe that we'll see similar results on this.:]

[We've also done a streamlining, actually a significant streamlining just this past 40 days. This did include some aggressive cost-cutting measures including some layoffs, which are unfortunate, but we are certainly not an outlier in that. Many of you have seen similar actions at very large and actually profitable tech companies. We believe that this will result in breakeven and operational profitability going into next year. This, combined with much higher revenue and our outlook for profitability next year is definitely improving, and I expect to have a lot more to say about that when we report Q4.:]

[As to guidance, we can reiterate our annualized revenue run rate projection for 2022, again, in the range of $40 million to $50 million. That also assumes closing at least one fairly large new client contract before year-end, which I'm very confident, and that excludes any M&A for the remainder of the year. We believe that the previous discussion of $100 million in revenues for next year is realistic. That combines strategic M&A and organic growth. So speaking about M&A, we believe that next year should be transformative. The landscape in our industry, particularly for a large number of small and midsized privately held companies and dozens of publicly traded companies in our industry, they have been much like us, victim to a sell-off in the markets.:]

[What we're seeing is some very, very undervalued opportunities for acquisition going into the SPAC transaction and shortly thereafter. We believe this is very good for us because most of you who are familiar with our 2021 and early M&A strategy, we had 72 companies in the pipeline. We had a great shortlist of targets. We ended up completing one Battle Bridge. And we would have completed other ones, which certainly have been higher profile, accretive and profitable have we been trading on a senior exchange, not that, that's an excuse, but it is clearly a reason.:]

[The targets that we had, their Boards of Directors ended up voting against the acquisition because of our OTC listing. We believe that will change dramatically as we go forward with Abri. And with that obstacle removed, we're incredibly excited about the opportunities to build a very strong AdTech firm with very valuable customer base for cross-selling relationships, accretive cash flow, state-of-the-art intellectual property, extraordinary management talent and technological know-how. We are currently in advanced discussions with more than one such business combination to build the company that we've always envisioned and we plan on moving forward aggressively as soon as the Abri SPAC deal closes.:]

[Also speaking to that, and let me choose my words here very carefully the OTC listing is extremely attractive because there is a void in the IPO market right now. Several friends of mine who run multibillion-dollar businesses that were in the IPO pipeline and were scheduled to list in Q3 and actually slated for Q4 have had those cancelled. What this has done is it's resulted in a number of privately held companies who were seeking to go public to look for alternative means. I've actually been approached by a number of them with valuations ranging from the low side, $50 million to $100 million; and one in particular that was quite large.:]

[It has a valuation of over $4 billion. Some very attractive ones in between. Given that we are spinning off our business into Abri, and if we time it properly, we could, in effect, merge in a privately held company with a significant value concurrent with the spin-off of our business into Abri, thereby not becoming a shell and enabling the incoming business to then up list to the New York Stock Exchange or NASDAQ. Given that the IPO market is challenging and many very attractive companies with high valuations are seeking this option, and we have been in discussions with them. Again, I mean careful with how I describe this.:]

[It is feasible to see a concurrent incoming merger as we spin off our business. What does this mean for you all and any new shareholders coming in, there would be a retention of shares for our existing shareholders that would be anywhere from 10% upwards. So in effect, if we merge in a business with a valuation of $250 million, existing shareholders would retain 10% or $25 million. So that would be a good starting point if their business plan is solid, and they prequalify for up listing our shareholders would participate in the up list in valuation. Again, I've got to be careful how I describe this here, but I will absolutely announce this immediately.:]

[One other thing that I would point out that as our business is spun off, I and the balance of our management team will longer be affiliates of Logiq, we're shareholders. So therein lies our motivation to get something like that completed.:]

[I'll stop talking about that, and I will open it up for questions. So those of you who are familiar with Zoom, there is a chat box at the bottom, and you can send me a message if you would like to ask a question, and I already have a few.:]

[Brent Suen:]

I'm a Logiq shareholder and was one on December 31, 2021, but didn't receive my GoLogiq shares yet. That's the first question.

[Please e-mail us, and we'll have the transfer agent work with you on seeking that.:]

[Second question. What revenues do we expect to make in Q4 to get to $40 million to $50 million a year. As indicated, and I'm qualifying that with we will exit the year on a $40 million to $50 million run rate. So the new client that we signed up and the one pending will contribute to revenues in Q4 and annualizing those on Q4 will put us at that $40 million to $50 million run rate.:]

[Question two is actually the same as the first one.:]

[Okay. Here's another one. Could we be acquired by another company.:]

[Louis, the SPAC transaction that we announced on September 9, and there is follow-up filings and press releases overviews that is an effect in acquisition. The valuation of that is $114 million in Abri shares, and our current market cap is roughly $20 million. So there is a disparity there. I am not speaking to market action, but it is possible that we can narrow that gap as we move towards close, but we'll see.:]

[Anyone else for questions, please send them over to me. I can have you ask in person or just read them out. Anyone?:]

[Okay. Well, I guess that was it for questions.:]

[Let me just refresh this just to make sure I didn't leave anyone out. Well, as always, you all have my e-mail. So if you have follow-on questions, please reach out, myself or John or other members of our team. We will endeavor to answer them. Definitely keep an eye out for news and filings regarding the Abri SPAC transaction and new client transaction and certainly a post-spin-off.:]

[Okay. We do have a few questions here.:]

[Okay. One question is about the end of the 10-day period.:]

[Okay. Let me clarify that. Thanks, Jim. We filed the S4 2 Thursdays ago. The Securities and Exchange Commission has a 10-day window to respond to us, so that would put us at today or tomorrow, and they'll let us know if they have comments or review. Typically, there is. We're factoring in that there will be. Again, I'm estimating a going effective date sometime in December onward and going to proxy and closing sometime in January. I hope that answered the question, Jim.:]

[Another question. Are we in talks with institutional investors prior to the de-SPAC with such a value disconnect between the $114 million valuation of Abri versus the $20 million that we are currently trading at.:]

[We have been approached by institutional investors. Most of that has been surrounding a post SPAC view. And if we are seeking acquisition funding, these -- most of them have been referred to us and are familiar with our endeavors previously on the acquisition front, of which it was significant, but they were precluded from participating because we're in the OTC. We believe, again, that going into the Abri's SPAC will enable us to grow through accretive acquisitions, also improve our profile being on NASDAQ and further enable greater client traction and strategic partnerships. And otherwise, that's it.:]

[One other question. How will shareholders know if there's no questions from the SEC.:]

[We would do a filing that we have gone effective immediately. Just to clarify, I'm sure this is making it more confusing. If the SEC does not have any comments or does not want to review, we would, in effect, go effective immediately and put it up for a proxy vote on both the Abri side and ours.:]

[With that, again, reach out to me if you have questions, call or e-mail. And I appreciate everyone participating and bearing with me on the first video call. Thanks, everyone, and stay tuned for more. Thank you.:]