MICT, Inc.
Q2 2020 Earnings Call Transcript

Published: 17 Aug 2020

[Darren Mercer:]

Thank you, and good morning, everybody. If I can turn your attention to Slide 3 of the presentation, we're very pleased and excited to have recently closed two critical transactions, which are contemplated to create significant value for MICT shareholders. In connection with such transactions pursuant to which MICT now controls operating businesses in the global fintech sector, GFH; and the telematics sector, Micronet, MICT believes that it is well positioned to grow revenues and earnings. On July 1, 2020 MICT completed the acquisition of GFH for approximately US$25 million in convertible securities of MICT, launching MICT into the global fintech industry. Pending shareholder approval on September 3, 2020, MICT special meeting of stockholders, MICT expects to receive the balance of the US$15 million that remains to be funded through convertible promissory notes, convertible into shares of MICT common stock upon stockholder approval at a conversion price of $1.10 per share. Additionally, just one week before the end of the second quarter on June 23, 2020, MICT increased its position in Micronet Limited’s outstanding ordinary shares. MICT currently owns 53.39% of Micronet Limited’s outstanding ordinary shares, thus giving MICT controlling interest in its telematics business subsidiary. Through GFH’s deep experience in network in the Asian markets, we believe we are well positioned to expand Micronet's business beyond the U.S. and Europe into Asia. The acquisition of GFH brings crossover benefits to the telematics business, and is a driving reason for MICT’s decision to increase its stake in Micronet. Per U.S. GAAP accounting principles in the third quarter of 2020 MICT will now report revenues and financial results from GFH. If I can turn your attention to Slide 4, MICT believes that it has created a tremendous platform for future growth. This platform combines the anticipated organic growth of our operating businesses in fintech and telematics with strategic and creative acquisitions that are contemplated to be completed in the future in an effort to further expand these businesses. Micronet is well established with a robust product portfolio and installed base of customers including global logistics and trucking companies in the global telematics market, which is expected to grow to $45 billion by 2022 according to the Grandview Research. GFH’s versatile proprietary trading technology platform is designed to serve a large number of high growth sectors, as well as to interface with platforms used by strategic partners. GFH’s primary areas of focus include online brokerage for equities trading and sales of insurance products in several foreign markets. The early and primary focus will be on the provision of services in China, where the significant growth in the country’s affluent class has driven a surge in demand for investment products and wealth management services. With several accretive acquisition opportunities in the fintech and telematics sectors currently in our pipeline and under consideration, we are conducting due diligence and looking forward to announcing the achievements of additional revenue-driving events in the future. If I can now turn your attention to Slide 5, on Slide 5, we will review MICT's Q2 2020 financial results. As a reminder between February 24, 2019 and June 23, 2020 MICT held less than 50% ownership of Micronet and therefore did not include Micronet’s financial results during that time in its consolidated financial statements based on U.S. Generally Accepted Accounting practices, GAAP. Our financial results for the three months ended March 31, 2019 reflect Micronet Limited revenues for the months of January 2019 and February 2019 only. MICT will include Micronet's P&L financial result in its consolidated statements beginning in the third quarter of 2020. MICT reported no revenues, gross profits or research and development, R&D, expense in the second quarter of 2020 and 2019. Selling, general and administrative, SG&A, expense in Q2 2020 was $668,000 compared to $670,000 in Q2 2019. Net income attributable to MICT was $227,000 in Q2 2020, compared to a net loss of $1.1 million in Q2 2019. As of June 30, 2020, MICT had $9.7 million in cash. I will now turn the call to Moran for more detailed financial review.

[Moran Amran:]

Thank you, Darren, and good morning, everyone. The next slide illustrates the revenue for the six months ended June 30, 2020, as compared to the same period in 2019. Revenue was zero in the first six months of 2020 compared to $477,000 in the first six months of 2019. Slide 7 provides a more detailed breakdown of the second quarter and six months ended June 30, 2020 as compared to the 2019 numbers. Total operating expense in the second quarter of 2020 was $668,000 as compared to $670,000 in the second quarter of 2019. Operating income was $227,000 in the second quarter of 2020 as compared to a loss from operation of $1.1 million in the second quarter of 2019. Net income attributable to MICT in the second quarter of 2020 was $227,000 or $0.02 per basic share, and zero per diluted share, as compared to a net loss of $1.1 million or $0.1 per basic and diluted share in the second quarter of 2019. The net income is primarily a result of gain from starting to consolidate Micronet and financial income results from the cancellation of recording impairment for Micronet. Turning to Slide 8, on our balance sheet, we have $9.7 million in cash and cash equivalent, $305,000 in receivable, $9.3 million in bank and other debts, $1 million in net working capital and $6.5 million in shareholders' equity, as of June 30, 2020. I will now turn the call back to Darren.

[Darren Mercer:]

Thank you for getting on the call everybody today. We are excited about MICT's future and to continue to build value for both our longtime and new investors alike.

[Operator:]

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