Tingo Group, Inc.
Q3 2023 Earnings Call Transcript

Published: 17 Nov 2023

[Operator:]

Greetings, and welcome to the Tingo Group Third Quarter 2023 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include forecasts, estimates, or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on the future holds, they’re not guarantees and are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as the date of this presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of the new information or future events. Throughout today’s discussion, we will attempt to present some important factors relating to our business that may affect our predictions. You should also review our most recent Form 10-Q filed today and Form 10-K for a more complete discussion of these factors and other risks, particularly under the heading Risk Factors. A press release detailing these results crossed the [wires] this morning and is available in the Investor Relations section of our company’s website, tingogroup.com. Your host today, Kenneth Denos, Tingo Group Co-Chief Executive Officer, will present results of operations for the quarter ended September 30, 2023. At this time, I will turn the call over to Tingo Group Co-Chief Executive Officer, Kenneth Denos. Please go ahead.

[Kenneth Denos:]

Thank you, operator, and good morning, everyone. I'm pleased to welcome you to today's third quarter 2023 financial results conference call. Despite the challenges we have encountered over the past few months, namely, the short-seller attack in June which had a negative impact on customer confidence, the significant devaluation of Nigeria's currency following the lifting of certain foreign exchange restrictions, a period of economic stagnation and high inflation in Nigeria following the government elections in February 2023, and subsequent change of presidential administrations in May, I am proud of our progress and achievements over the past 3 months and excited about our future prospects for the remainder of the year and beyond. For those of you joining us for the first time, I would like to take a moment to introduce Tingo Group. Tingo Group is a diverse Fintech and Agri-Fintech Group of Companies with operations in Africa, Southeast Asia, and the Middle East. We significantly expanded and somewhat transformed the company when we acquired 100% of Tingo Mobile Limited on November 30, 2022, and then acquired Tingo Foods Plc on February 7, 2023, before subsequently changing our name to Tingo Group Inc. on February 27, 2023. As of today, the Tingo Group is comprised of the following businesses

[A - Unidentified Company Representative:]

Can you expand on the reason for the decrease in the Nwassa revenue during the quarter? And do you see this as temporary?

[Kenneth Denos:]

Nwassa generates its revenue through the transactions made by our farmers. These farmers use Nwassa to purchase farming inputs, to notify us they have product to sell, and to access a range of services such as bill payments, micro finance and insurance. Unfortunately, the negative press we received in June was picked up in Nigeria, including newspapers and other media that is distributed into the rural parts of the country. The Nwassa platform, just like any commercial platform, is based on trust. And these farmers want to know that their transactions will go through and that their money is safe. So unfortunately, the negative press created a significant amount of fear and lack of confidence in our farmers, which resulted in a slump of transaction volume and revenue. Thankfully, we've been able to work with cooperatives and with AFAN since -- to restore customer confidence, which is having a major positive impact. Also, as you may have seen in our recent press release, AFAN, which is the umbrella organization for the entire farming industry of Nigeria, has now adopted us as their exclusive agricultural platform, and they are also increasing the promotion and support towards us. With all the steps we have taken, we expect to resume the growth rates we were enjoying prior to the short-seller attack, additional to which we should benefit from a step-up in revenues and earnings from both Nwassa and mobile leasing when our 6 million new phones are deployed to the 6 million new customers in December.

[Unidentified Company Representative:]

Revenue for Tingo Foods dipped slightly compared to the second quarter. What was the reason for this?

[Kenneth Denos:]

Tingo Foods, which was also affected by negative press, not so much in relation to our customers, but very much so in relation to the farmers that supply us. On the supply side, our farmers have to be able to trust that we will pay them for the crops they produce. And unfortunately, their confidence decreased when they saw the negative press. Again, thankfully with the support of the cooperative in AFAN, we have made good headway in restoring the confidence of the farmers that sell their produce to us, and we expect to be back to the levels of supply that we enjoyed prior to the short-seller attack. Now it's worth noting that Tingo Foods also suffered from seasonality in July and August, with the level of crops being harvested drop significantly. So, this factor combined with the drop in supplier confidence towards us, had a real impact. I am pleased to say, however, that with the rebound we experienced in supply levels, together with our sales outlook for the next few months, we are confident of the strong end to the year and that we can achieve healthy growth thereafter.

[Unidentified Company Representative:]

You previously mentioned that the Tingo DMCC export business was expected to generate around $1 billion of revenue during the quarter, whereas your actual export revenue was around 1/3 of this. Were orders delayed or did you suffer cancellations?

[Kenneth Denos:]

Again, for the reasons mentioned in my previous 2 answers, our export business unfortunately suffered from both order postponements and order cancellations in the third quarter, in particular from the new customers we have just started to deal with. This not only resulted in a considerable loss of revenue and earnings for us in the third quarter, which we hope to catch up over the coming months, but it also delayed the dollarization of our business. In fact, much of the postponed or canceled business was set to be transacted in U.S. dollars and other primary currencies. Notwithstanding the challenges we have faced, I'm pleased to say that we are seeing strong signs of recovery in our operations. And we expect to be back on track by year-end, and I believe in a great position to have a strong 2024.

[Unidentified Company Representative:]

Do you have an update regarding the delivery and deployment of the 6 million smartphones you ordered in Q2 and that you have made sizable payments against in both Q2 and Q3?

[Kenneth Denos:]

Yes, we are scheduled to receive delivery of the 6 million devices from our supply partner by the end of November, with their deployment through AFAN immediately thereafter. So, we expect to receive and generate lease revenue as well as transaction revenue through the Nwassa platform from these devices by year-end 2023. With an uplift in mobile phones of more than 60% to be followed by AFAN's commitment to introduce a further 13 million customers, as well as our expansion plans for Ghana, Malawi and Pakistan, we're excited about our growth prospects for 2024 and beyond.

[Unidentified Company Representative:]

Can you provide an update on the status of construction of your new food processing facility?

[Kenneth Denos:]

Well, some -- as you know, some of our executive and management team and members of the media visited the site in June of this year, and we are now planning a further media visit to take place around year-end or early in the new year. We can though confirm that our construction joint venture partner is on track, and we remain confident we'll be in a position to commence operations at least in Phase 1 of the facility by 2024.

[Unidentified Company Representative:]

Is there an update on the dividend that you announced in August?

[Kenneth Denos:]

We are working closely with our banks in Nigeria, as well as the Central Bank of Nigeria to receive the foreign currency conversion approval as soon as possible. As some of you will be aware, we had hoped to receive this approval long before now. However, the new process that all Nigeria's companies must follow have proven to be more complex and elongated than originally envisaged. I am though pleased to say that the approval is expected very soon.

[Unidentified Company Representative:]

Are you considering an increase in the requested FX conversion to cover a second dividend payment rather than having to go through this all over again immediately?

[Kenneth Denos:]

With our current foreign exchange conversion application at an advanced stage, we don't wish the risk causing any disruption or further delays by changing the amount. Our intention is, therefore, to obtain the approval of our current application before then submitting a new application for a larger amount. It is our understanding that the approval process for subsequent foreign exchange conversions will be more straightforward than has been the case for this first conversion. We also expect the approval timeline to be much shorter.

[Unidentified Company Representative:]

It has been mentioned in previous announcements that the Board were considering a share buyback or a one-off special dividend in addition to the quarterly dividend. Is this still the case? As I personally believe this would help rebuild shareholder confidence.

[Kenneth Denos:]

Yes, this is generally still the case. As we noted in our presentation, we are optimistic about the company's continued growth development and cash flows from operations. And we expect to be in a position to carry out some form of a special dividend, as well as paying a regular quarterly dividend in the future.

[Unidentified Company Representative:]

When will the A credit rating in Nigeria be restored?

[Kenneth Denos:]

We have recently commenced interactions with the credit agency to restore our credit rating as part of which we are providing you with up-to-date information. We hope to receive the restoration of our credit rating either by the end of this year or during the early part of 2024.

[Unidentified Company Representative:]

You recently announced plans to expand into Pakistan and an MOU with the government of Pakistan. This sounds like a very big opportunity. Can you provide any further information?

[Kenneth Denos:]

Yes. We believe it is a big opportunity. Here's just some key points to consider. Pakistan is the fifth largest country in the world by population. The country represents one of the largest agricultural markets in the world, but at the same time, Pakistan suffers from low crop yields and very high levels of post-harvest loss. And if we can effectively deploy our business model, the Tingo model, and the Tingo ecosystem is expected to have a significant impact on Pakistan's agricultural sector and add considerable value. In addition, we are receiving significant support from the Pakistan government, both at a provincial level and the federal level, which we believe will help our rollout. As well as rolling out our Agri-Fintech business in Pakistan, we also intend to launch our food processing and export business in the country, where, again, it is evident there is a significant need.

[Unidentified Company Representative:]

Are you any closer to finding a permanent industry-leading NASDAQ experienced CEO?

[Kenneth Denos:]

We've been evaluating and have had informal discussions with highly qualified individuals in this regard. Now no offers or formal decisions have yet been made, but we are making good progress on that point.

[Unidentified Company Representative:]

This concludes the question-and-answer session. I would now like to turn the call back over to Mr. Denos for his closing remarks. Please go ahead.

[Kenneth Denos:]

Thank you, operator. I would like to thank each of you for joining our earnings conference call today and look forward to continuing to update you on our ongoing progress and growth. If we were unable to answer any of your questions, please reach out to our IR firm, MZ Group, who would be more than happy to assist.

[Operator:]

Thank you. This concludes our session for today. You may now disconnect.