Tingo Group, Inc. (NASDAQ:TIO) Q3 2023 Earnings Call Transcript

Tingo Group, Inc. (NASDAQ:TIO) Q3 2023 Earnings Call Transcript November 17, 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: Tingo Mobile, which is a leading fintech and agri-fintech business in Africa that operates through a device as a service and smartphone USSD platform model; Tingo Foods, which offtakes crops from Tingo Mobile’s substantial and growing customer base of farmers, and processes those crops into finished food and beverage products; Tingo DMCC, which operates the commodity trading platform and export business from the Dubai Multi Commodity Center, and deals in both raw agricultural commodities from our Tingo Mobile farmers as well as finished food products from Tingo Foods; TingoPay, a super app supported by a Pan-Africa partnership with Visa.

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Q&A Session

Following a soft launch of the beta version earlier this year, TingoPay was launched as a full version on September 13. TingoPay provides its customers with payment services and e-wallet and a range of value-added services. It also offers a range of merchant services to businesses. We also have a number of fintech verticals that have, to date, been focused on the Southeast Asia market. However, as we focus on further increasing shareholder value and leveraging the most profitable and valuable parts of Tingo Group, we are currently restructuring this part of the business and winding down or disposing of any operations that do not achieve our target contribution metrics. Most recently, in partnership with the Pakistan Government’s Khyber Pakhtunkhwa Information Technology Board, we are preparing to rollout our agri-fintech, food processing and export businesses throughout Pakistan.

We believe that our group of businesses and the synergistic ecosystem may create and place us in a remarkable position from which we can expand both in our current markets and internationally, and deliver significant further growth. Despite the challenges I mentioned earlier, we achieved year-over-year quarterly revenue growth, and despite a decline in revenue and earnings in the third quarter compared to the second quarter, we have made significant progress with the further development of the business. And we are confident that the fourth quarter will see a return to growth. What is important to note is that we have had to endure significant challenges and headwinds between June and September, not least because of a substantial devaluation of Nigeria’s currency in June, and a period of economic stagnation in Nigeria following its government collection and subsequent change in presidential administration.

As mentioned in our second quarter trading update, it is worth noting that the significant devaluation of Nigeria’s currency occurs as a result of the Central Bank of Nigeria’s removal of foreign exchange restrictions, which we believe will deliver significant long-term benefits to our business, including the acceleration of the dollarization of our business and helping our export and commodity trading activities become more profitable. Furthermore, once the policies of Nigeria’s new government have been fully implemented, we expect Nigeria’s currency to appreciate and its economy to rebound strongly, which should be markedly beneficial to the company and our shareholders. Following completion of our acquisition of Tingo Mobile on November 30, 2022, we have been highly profitable, notwithstanding the headwinds we noted above.

We have also achieved organic growth, including through our partnership with the All Farmers Association of Nigeria known as AFAN. This group is set to continue following the expected delivery in the fourth quarter of 2023 of 6 million smartphone handsets that we plan to distribute to new AFAN customers. Our financial results highlights for the Group, as shown on this slide, are representative of our strong financial performance since the completion of our acquisition of Tingo Mobile on November 30, 2022, and our subsequent acquisition of Tingo Foods. For the 9 months ended September 30, 2023, the company generated over $2.41 billion in revenue, $870.8 million in gross profit, $492.5 million in operating income and $777.9 million in EBITDA.

Furthermore, our high levels of operational cash flow enabled us to invest $426.4 million in this quarter on the purchase of mobile phones for new customers, as well as inventory payments for our Tingo DMCC export business. As mentioned previously, our reason why Tingo Group is very important to us, and those of you that have listened to or read our presentations will most likely already be aware of our mission statements. For those of you who are not familiar, our overarching mission at Tingo Group is to foster digital and financial inclusion through our fintech platforms and to drive social and economic upliftment. In our agri-fintech businesses our mission includes our commitment to make a significant difference in improving global food supply and tackling the world’s food security prices by delivering farmer empowerments, improved crop yields, a reduction in post-harvest losses and better access to both foreign and domestic markets.

At a regional level, we also aim to support farmers in Africa and now Pakistan, to achieve sustainable food self-sufficiency and bring an end to Africa’s food insecurity and poverty. By way of a recap, we entered into a definitive merger agreement to acquire Tingo Mobile on May 1, 2022. Following this, we immediately appointed a team of some of the world’s largest and most reputable professional advisors to undertake extensive due diligence and financial analysis. The team included a Big 4 accounting firm, a number one U.S. law firm in Africa and a number one U.S. M&A investment bank. We announced on June 15, 2022, that the due diligence exercise has been completed and that the findings were positive. The original merger agreement was amended and restated in October of 2022 to facilitate the expedited acquisition of 100% of Tingo Mobile, and the acquisition was subsequently completed on November 30, 2022.