LMP Automotive Holdings, Inc.
Q4 2019 Earnings Call Transcript

Published: 25 Feb 2020

[Operator:]

Thank you for standing by. This is the conference operator. Welcome to the LMP Automotive Holdings Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions]I would now like to turn the conference over to John Mattio, Investor Relations for LMP Automotive Holdings. Please go ahead.

[John Mattio:]

Thank you, operator. Welcome everyone to LMP Automotive Holdings’ fourth quarter and full year 2019 financial results conference call. Joining us from the company are Mr. Sam Tawfik, President and Chief Executive Officer; and Mr. Bryan Silverstein, Chief Financial Officer. After the company’s prepared comments, we have allocated time for questions in the Q&A session.Before we begin, I would like to remind everyone that some of the statements in this conference call including statements regarding expected future financial results and industry growth may contains forward-looking statements within the meaning of Section 27A of the Securities Act of the 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on management's current expectations and are subject to risks and uncertainties that could negatively affect its business, operating results, future financial condition [Technical Difficulty]

[Operator:]

Mr. John Mattio, your line is live.

[John Mattio:]

Are you ready, operator?

[Operator:]

Please go ahead, Mr. John Mattio.

[John Mattio:]

Thank you, operator. Welcome everyone to LMP Automotive Holdings’ fourth quarter and full year 2019 financial results conference call. Joining us from the company are Mr. Sam Tawfik, President and Chief Executive Officer; and Mr. Bryan Silverstein, Chief Financial Officer. After the company’s prepared comments, we have allocated time for questions in the Q&A session.Before we begin, I would like to remind everyone that some of the statements in this conference call including statements regarding expected future financial results and industry growth may contains forward-looking statements within the meaning of Section 27A of the Securities Act of the 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on management's current expectations and are subject to risks and uncertainties that could negatively affect its business, operating results, financial condition and stock value.Factors that could cause actual results to differ materially from those currently anticipated includes

[Sam Tawfik:]

Thank you, John, and thank you everyone for joining our fourth quarter and full year 2019 conference call. First, let me begin. I would like to thank the whole LMP team, our professionals, our board and our investment community for their support and efforts in the IPO and the secondary offering. We also recognized the challenges of 2019 and the hard efforts it will take for the team to realize its 2020 goals. Thank you everybody.During the fourth quarter, we grew revenues to $3 million with gross profits of $247,000 as we began receiving new 2020 model inventory in the fourth quarter of 2019 utilizing some of the proceeds from our IPO and our allocated fleet utilization for Subscription Leasing and Rentals increased to 83%. The recent luxury fleet acquisition from Revolve announced last week added to our inventory and expanded our South Florida market presence. As we grow our inventory, we anticipate being able to match our growing demand, which is projected to grow substantially in the future. In addition, over the last three months we launched subscription leasing in six new markets

[Bryan Silverstein:]

Thank you, Sam, and good evening everyone. I will now discuss some of our financial highlights. Total revenues are approximately $10.9 million for the year ended December 31, 2019 including subscription revenue approximately $1.4 million and rental revenue of approximately $352,000. Total revenue in the fourth quarter of 2019 decreased 47%, to $3 million, compared to $5.8 million, in the fourth quarter of 2018. Revenue decreased in the fourth quarter of 2019 primarily driven by our intent to improve the quality of our revenues by maintaining the higher margin subscription leasing and rental fleet active for a longer period of time before those vehicles are available for sale on our online platform. In addition, we also sold vehicles to meet cash needs at the end of 2018.Revenue growth from Q3 2019 to Q4 2019 is as follows. Vehicle sales increased from approximately $793,000 in Q3 2019 to $2.5 million in Q4 2019. In December of 2019, we introduced commercial open-ended leases, which generated approximately $980,000 in vehicle sales revenues with implied interest to be recognized over the term of lease as interest revenue. In 2020, we plan to offer these leases to both commercial customers and consumers and subscription and rental revenues increased from approximately $384,000 in Q3 2019 to $482,000 in Q4 2019. Gross profit in the fourth quarter of 2019 increased $247,000, or 8% of revenues, compared to a loss of $1 million, or 18% of revenues in the fourth quarter of 2018. Margin expansion was driven by a higher allocated fleet utilization in our Subscription Leasing and Rental business in the fourth quarter.Total operating expenses, consisting of selling, general, and administrative expenses, shared-based compensation, acquisition, consulting and legal expenses and property, equipment, leasehold improvements and intangibles depreciation and amortization were approximately $796,000 in the fourth quarter of 2019, compared to $1.9 million in the fourth quarter of 2018. The decrease in operating expenses was primarily due to decreases in expenses related to payroll advertising and rent.In addition, we discontinued our Miami Beach, Florida rental operations and consolidated them with our Plantation, Florida operation in the second quarter of 2019.Net loss in the fourth quarter of 2019 totaled $572,000, or a loss of $0.70 per share, compared to a net loss of $2.9 million, or a loss of $0.12 per share, in the fourth quarter of 2018. Total shares outstanding as of December 31, 2019 were 8,691,323.Our cash balance as of December 31, 2019 was $6.5 million. Additionally, we completed a follow-on public offering in February, 2020 with net proceeds of $17.5 million. Cash as of today is approximately $20 million.Our vehicle inventory financed as of December 31, 2019 was approximately 22%. In February, 2020 we executed master loan and security agreement and lease agreements with two lenders as a part of the Revolve Technology fleet acquisition totaling $3.2 million in February 2020.We will continue to evaluate additional vehicle financing options and plan to increase the amounts of our inventory that is financed to add to our current cash on hand for future acquisitions and continued vehicle inventory growth.Our inventory growth in the second half of 2019 increased by 47% and is broken down as follows; an increase of 1.3 million or 19% in Q3 2019 over Q2 2019 and additional increase of $1.9 million at 23% in Q4 2019 over Q3 2019. This resulting in an ending inventory balance of $10 million as of December 31, 2019. Inventory after the Revolve fleet acquisition is approximately $14 million.As of December 31, 2019 our total number of common shares outstanding is 8.7 million. Stockholder's equity as of December 31, 2019 was $15.8 million. After our follow-on offering of 1.2 million shares in February, 2020 and 33,183 shares issued as part of our asset acquisition in February, our common shares outstanding is 9,924,506.Stock holders equity as of today is approximately $32 million. Our 2018 equity compensation plan has reserved 1.5 million shares of our common stock for issuance under the plan. As of December 31, 2019 we have issued a total of 711,000 stock options to purchase shares of our common stock of which 344,500 remain outstanding as of year end with approximately 259,000 vested.Our EPS basic and diluted for the year ended December 31, 2019 was a loss of $0.24 as compared to the year ended December 31, 2018, a loss of $0.27. The weighted average shares outstanding as of December 31, 2018 was 23.7 million shares and as of December 31, 2019 was 16.6 million shares.Non-GAAP financial measure EBITDA, is defined as a net loss before interest expense, income tax expense, depreciation including and vehicle inventory impairment and amortization, in 2019 our EBITDA on a quarterly basis is as follows. Q1 2019 was a loss of approximately $991,000. Q2 was approximately $743,000. Q3 was approximately $223,000 and Q4 was approximately $224,000. That completes our financial results and I will turn it back over to Sam.

[Sam Tawfik:]

Thank you Bryan for that detailed overview. I'm now going to hand it over for a questions, Q&A. Let me just end it with, we appreciate the trust that the shareholders have in our company and it's strategy and I look forward to future update and future investor meetings and dialogue. Thank you very much Bryan and thank you everybody, we'll open it up to Q&A now.

[Operator:]

[Operator Instructions] Our first question comes from Andrew Tressler with Trident Partners. Please go ahead.

[Andrew Tressler:]

Hi, Sam congratulations, sounds like it was a great quarter. We were part of your IPO and during your roadshow, you mentioned that one of your ultimate goals was make your company S&P 500 company. Wondering if that is still in your realm of possibilities and when you think that may happen, if so?

[Sam Tawfik:]

Hi Andrew, and thank you. We are pursuing an acquisition strategy and we're in the automotive industry and we will continue to pursue that. And I believe that – our intent is to reach the goal.

[Andrew Tressler:]

Thank you.

[Operator:]

Our next question comes from David Rockeson, a private investor. Please go ahead. Mr. David Rockeson, you're line is now live.

[Unidentified Analyst:]

Sorry, I was on mute. So thank you for taking my question. My question is whether you could outline the effective revenue growth rate in 2020 and what do you expect will be the main drivers of the growth? Thank you.

[Sam Tawfik:]

Hi, David. Thank you. The main drivers for our growth, it currently is organic. We're in a very hot segment and our view analysts have predicted $2 billion a year in growth and subscriptions. It truly is a replacement for lease and finance. So our growth is pretty much 100%. Well, it's organic. I know, we purchased acquisitions, we purchased inventory from Revolve. And that's an inventory transaction. And as we get inventory, it moves quickly. So we're seeing a very impressive demand and consumers want subscriptions. It's just a matter of getting the inventory in, in a timely fashion. I hope that answers your question.

[Unidentified Analyst:]

Yes, thank you

[Sam Tawfik:]

Thank you. David.

[Operator:]

This concludes the question-and-answer session. I would like to turn the conference back over to Sam Tawfik, the Chairman and Chief Executive Officer for any closing remarks.

[Sam Tawfik:]

Thank you. And thank you everybody for your support. And we're looking forward to our next call and update.

[Operator:]

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.