Ideanomics, Inc. (IDEX) on Q1 2021 Results - Earnings Call Transcript

Operator: Greetings and welcome to the Ideanomics First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tony Sklar, Vice President of Communications and Head of Investor Relations. Tony Sklar: Thank you very much, operator, and welcome everybody to the Ideanomics Q1 2021 earnings conference call. Joining me today, I am pleased to have Mr. Alford Poor, our Chief Executive Officer; Ms, Kristen Helsel, our Chief Revenue Officer; and Mr. Conor McCarthy, our Chief Financial Officer. A webcast of today's call will be archived and available in the Events and Presentations sections of our corporate website for a minimum of 30 days. Alfred Poor: Thank you, Tony and thank you to everyone joining our call today. Financial results in Q1, 2021 exceeded our expectations, and we are looking forward to the second quarter results. Ideanomics is transforming dramatically quarter-over-quarter. And I'm both pleased and proud to say that as of today Ideanomics is the healthiest, it has been in my almost three years with the company. And exciting blend of acquisitions and organic growth along with significant cash on the balance sheet has management confident that our revenues will continue to increase in our various business segments for the foreseeable future. The company was fortunate to capitalize prior to a broad market pull back across our peer group although we continue to seek value in the sector regardless of market sentiment. Despite everything from COVID-19 and component shortages through the scarcity of containers and shipping delays, the EV industry is continuing to benefit from being the only viable, sustainable future for the automotive industry. We have taken measures to ensure such disruptions are minimized where possible, through hiring dedicated resources on the ground wherever such bottlenecks exist. Kristen Helsel: Thank you, Alf. As a very brief introduction, I recently joined Ideanomics as the Chief Revenue Officer. I have both technical - and I have both a technical and business background and has scale the number of companies in EV and CleanTech space over the past 12 years. I am incredibly excited to join this team at a time when we are building and aligning our operating entities to lead worldwide in electrification and Clean technology, delivering both real and disruptive change as well as meaningful revenue. I spent much of the last several weeks learning about our current Ideanomics ecosystem and focusing on how to build our business units in a synergistic way, while simultaneously scaling revenue. In each case, the opportunities and challenges are unique. I have visited with each of our businesses in the United States, and I'm working directly with our colleagues overseas until such time as international travel is appropriate for the - for me to visit our businesses, and operations in Europe and Asia. At Timios, we have a strong and well developed organization that had its best quarter in Q1, 2021, and I am pleased to say that we are developing new opportunities to support growth and expand revenue stream be on their traditional business line. My visit to WAVE reinforced my strong belief that the electrified future will be driven by inductive charging. The current WAVE product is a beautiful piece of engineering and has been working in some cases for several years in challenging conditions, and therefore demonstrated that we have a reliable and robust product ready for adoption at scale. Conor McCarthy: Thank you, Kristen. Good afternoon. In the first quarter work done over the last 24 months in building the foundation for growth in Ideanomics Mobility & Capital divisions started to come to fruition. This quarter marks the fifth consecutive quarter of growth in both revenue and gross profit. The highlights for the quarter are revenue of $32.7 million and a gross profit of $10.8 million. The first revenues from WAVE Ideanomics inductive charging business from Timios, our Title and escrow service companies both businesses were acquired in January 2021. We closed the quarter with $356 million in cash, which provides a deep pool of capital for investment in our Ideanomics Mobility & Capital business units. Now turning to discuss the financial performance in some more detail. Revenue for the quarter was $33.7 million, which represents the fifth consecutive quarter growth demonstrating the increasing strength of Ideanomics business. Timios Title and escrow business generated revenues of $27.6 million, and WAVE revenues of $1.8 million which were reported in the charging and batteries line in the revenue table. Both of these businesses were acquired in the first quarter of 2021, and consequently the financial results are only included from the date of acquisition. Revenue for electric vehicles was $3 million in the current quarter, up from just $55,000 in the first quarter of 2020. As Alf discussed on last quarter's earnings call, we have been reorganizing our operations in China. Revenues for EV in the first quarter were lower than the levels achieved in late 2020. However, we believe that the restructure in China will result in a return to growth in EV revenues in the coming quarters. Gross profit for the first quarter was $10.8 million, which represents a gross margin of 33%. Operating expense for the first quarter was $23.8 million as compared to $9.5 million in the prior quarter. The increase was due principally to the inclusion of the operating cost related to the Timios based acquisitions and a charge of $5 million arising from the settlement of a class action lawsuits. Professional fees in the first quarter were $5.2 million as compared to $1.8 million for the prior period. The growth was related to an increase in legal fees, consulting services and investor relations related expense. The increase in legal fees was related to raise of general corporate matters, the starting to regulatory inquiries, advice in mergers and acquisitions and advice in relation to the class action lawsuits. The loss from operations was almost $13 million as compared to $9.4 million in the prior period. The loss from operations included a $5 million expense related to the settlement of a class action lawsuit. Interest expense for the period was $0.4 million as well, and represents the saving of $2.7 million as compared to the prior period expense of $3.2 million. The prior period expense included charges related to the application of U.S. GAAP to the variable conversion price in the then outstanding new debt, which was all repaid in 2020. The currently outstanding convertible debt has a fixed conversion. We recorded a net loss of $0.7 million as compared to a net loss of $12.6 million in the prior period. This quarter includes a non-cash tax benefit, a gain of $12.9 million arising from the acquisition of Timios and WAVE. To conclude, the results for the first quarter demonstrate that the work over the last 24 months to build out the company's sales to financing to charging, S2F2C business model is bearing fruit and the company is poised for rapid growth. Milestones achieved in the first quarter include cash of $356 million on the balance sheet and an attractive line of acquisition opportunities. We recorded our fifth consecutive quarter of revenue growth, recruited the additional team members in the U.S. and China that we need to capitalize on the opportunities in the EV sector in general, and integrate Ideanomics assets into a complete end-to-end offering for our EV customers. In summary, Ideanomics is very well positioned to take advantage of the great opportunities ahead of us. That concludes my remarks. I'll get back to Tony. Tony Sklar: Well, thank you very much, Conor. That concludes the prepared remarks by management, and I know this is everybody's favorite time, our Q&A session. So Victor, if you wouldn't mind, operator, if you could give folks the instructions on how to, or is there are some hand. Operator: Our first question comes from Craig Irwin with ROTH Capital Partners. Please proceed with your question. Craig Irwin: Good evening and congratulations on the strong quarter, impressive? Alfred Poor: Thank you, Craig. Craig Irwin: The first question I wanted to ask is, for a little bit more color on U.S. Hybrid. This is a name we've known about for many years and Abas is a bit of a legend out there. I mean, given that he literally wrote the textbook, that all the engineering students today are using to learn about drivetrain electrification. What do you see is the potential revenue contribution over the course of 2021? I know Dr. Abas is known for his technology innovation and for doing really unique projects for very demanding customers, but are there components in the existing book of business where you see rapidly repeatable products or is this more a technology acquisition that fertilizes the success across the rest of the company? Alfred Poor: Thank you, Craig. It's an excellent question. Kristen, would you like me to take this question? Do you want to take this question? I'm happy for either of us to do so. Kristen Helsel: Alf, you can start, and I can add any color if appropriate. Alfred Poor: Absolutely, so thank you, Craig. This is interesting. Yes, as you mentioned Dr. Abas and his team probably been at the forefront of clean energy and low emission and zero-emission vehicles for the past 25 years. They've worked at pretty much everyone in the space from OEMs to the defense and the aerospace sector. So a lot of folks have relied on Abas and his team to produce everything from prototypes to fully working units. Abas has served as something of an innovation center for the industry, and that's allowed him to reach the healthy seven figures in revenues every year. We believe there is an opportunity - for him to start licensing his technologies to take him up into eight and nine figures of revenue in the future. We haven't closed the deal yet, it's still subject to a few - traditional closing conditions, it should close hopefully by the end of this month. So the chances to have an impact to pushing from seven figures to eight figures this year is probably too early to speak off, but certainly we believe this business is poised for growth. He's been looking actively in the market for a partner to help him scale the business. Now the EV industry and the potential for hydrogen fuel cells is very much on everybody's radar. And we were fortunate enough to strike the right chord with him such that he chose us as his partner. So, this is a business that does produce millions of dollars of revenue a year and being an innovation hub for OEMs and others we expect that to move up into the eight figures and nine figures over the next few years. Craig Irwin: Excellent, well congratulations. It looks like a really amazing fit to the portfolio. Second thing I wanted to ask about is, Timios and the title and escrow business, you reported $27.6 million in revenue in the quarter. But last year, I think this business for the full year did $60 million so some interesting alchemy going on there? Can you explain why this business is so very strong with this strength, may be a little bit one-time in nature given short-term changes in the market? Or is this something that can persist over the course of the year, and it seems that they contributed some pretty healthy margins; are those profit levels something that also are likely to persist over the course of the year? Alfred Poor: So the Timios business is obviously involved in the refinancing and the purchasing mortgage market is active, companies like Timios did incredibly well. So, we are in a low interest rate environment. There was a period for a couple of weeks where it looked like interest rates may increase as long as interest rates remain low, we can expect Timios to continue to perform well. We don't know what will happen with inflation. I think everyone's concerned with that, if we do see an uptick in inflation and we see a corresponding uptick in rates, typically, those are the types of headwinds that impact businesses like Timios. But that said, we're looking to aggressively support their growth plans. They've opened up a real business, which is going to be very interesting. So for us, we have a very vibrant business within Ideanomics' Capital Group and we're looking forward to more strong revenues from them in the future. Craig Irwin: Thank you. My last question is about Tree Technologies and Treeletrik motorcycles and mopeds. Can you maybe describe for us if there is an update on the delivery schedule into Malaysia or I should say into Indonesia? And have you sketched out the potential capital needed to build the new assembly plant in Indonesia for when much larger volumes are being shipped? Alfred Poor: Yes, so I'll address the first part of the question, second part is a conversation that’s more in tune with Conor and his CFO at Treeletrik, Richard Teoh. We were quite wise to say that the deliveries wouldn't start until early Q3. There was an opportunity perhaps for the deliveries to begin before that. But obviously, as you know, Craig the international supply chain in any part of automotive which includes motorbikes and mopeds as well has been impacted. Things are moving a little slower. We don't foresee any delays beyond that original July timeline we were starting to look at. So we think in terms of the vehicles being delivered from Malaysia is finished product into Indonesia that will begin in Q3 as we previously said. In terms of the assembly facility, this is going to be light assembly. So, the vehicles will be coming in and this isn't a heavy assembly of subcomponents. This is putting on the wheels, putting on what they call the steering, the plastic siding around, inserting the battery, putting the seats and that type of thing. So the facility shouldn't cost us more than a couple of million dollars U.S., to put in place and we're looking at some facilities, now. I don't know if you have any further comments, Conor? Conor McCarthy: Your comments right on the money, Alf and this is light assembly. It's - the bikes - there's none of the capital intensive stuff like plant, or anything like that. So we are looking at - so at this time, we think it will be in the range of $2.5 million to $3.5 million investment in the assembly line. Craig Irwin: Excellent, well, this was a very busy quarter. I should say congratulations on getting so much done and all this progress. I'm going to hop back in the queue now. Thank you. Alfred Poor: Thank you, Craig. Operator: Thank you. Our next question comes from Nelson Siu with Mackie Research. Please proceed with your question. Nelson Siu: Hi, everyone, and congratulations again on your great quarter. My question is… Alfred Poor: Thank you. Nelson Siu: The company had been strategic planning. Are you going to continued investing in human capital? And where it will be the focus of that? Alfred Poor: Human capital of course I mean as our revenues grow every business needs to grow the amount of people internally to service it. We've acquired some tremendous human capital through the WAVE team as well as the U.S. Hybrid team recently. So in terms of innovation, I think we have a strong team there. We are filling out the number of open positions within Ideanomics, but more broadly throughout the management and general tiers of the company. We'll continue hiring people, but I think we are coming close to the 2021 kind of open candidate also, we had. Our HR teams has been very pleased with the ability to bring people in and I think we're pretty close to closing out the open roles that we hear that we approved. Nelson Siu: Okay, great. Thanks for answering my question. Alfred Poor: Thank you. Operator: Our next question comes from Sean Macdonald with Acorn Management Partners. Please proceed with your question. Sean Macdonald: Thank you very much, and again Ideanomics congratulations on a phenomenal quarter. Alfred Poor: Thank you. Sean Macdonald: One thing that I would like to note. Actually I guess my question would be twofold. Regarding your newest asset U.S. Hybrid branded that a lot of the revenues have been generated from some of your phenomenal acquisitions over the last year. I would assume that U.S. Hybrid fits well in the portfolio, not only for generating revenues, but for being integrated into your already existing components in portfolio so, and I apologize if you had touched on this? But maybe from a high level integrating these fuel cells into your own vehicles, could you explain a little bit of that process? And then once that transition is complete are you going to allow U.S. Hybrid to generate their own additional revenues from products and services on their own drivetrain components, or will this be fully folded into Ideanomics? Alfred Poor: Thanks so much for your question, Sean. I did mention this in the preamble. U.S. Hybrid and WAVE are very strategic acquisition for us because of our focus on the commercial vehicle sector. Both of them offer us the capability to cross sell. So, by that I mean when we sell a truck or a bus, we can sell WAVE's inductive charging system with it. One of the things that the Biden administration is underscored is that there needs to be a made in America component. If we do the assembly here, and we put in the type of technologies that we've acquired through the acquisition of U.S. Hybrid such as fuel cells, electric drivetrains, a DC-DC converters these have really, really important key components and that's what you want to be made in America, because that's the technology. The wheels, the seats, the windows, people don't care about these. These are all, think they are all made in America you have an incomplete understanding of the global automotive supply chain, but just now. So what's really important to the Biden administration is the tech that they're going to be helping to fund, is that providing American jobs? Is that American innovation? Ideanomics can put it up now and say, absolutely for us it is, so that's why this was a really important stepping stone for us. And was a follow-on acquisition that was very deliberate by us in terms of acquiring WAVE and acquiring U.S. Hybrid. It couldn't get the deals done in either case as quickly as we wanted to, but there could have been a period where they can - the acquisitions were pretty close back the time, but acquisitions always take time as you know. What was the second part of your question, sorry Sean? Sean Macdonald: Sure, the second part of my question was as U.S. Hybrid as a sole entity has again gotten a lot of attention. And their products and services are so much different than anything out there on the market. So when it comes to actually transitioning the fuel cells and the drivetrains and the core components into your own vehicles will you allow U.S. Hybrid to also pursue additional products and services on their own, or will this be a wholly owned subsidiary exclusive to your vehicles? Alfred Poor: It will not be exclusive to our vehicles. The intention with U.S. Hybrid is to do two things. One, make those technologies available to the vehicles we sell so they can meet the made in America requirements and also make sure that our vehicles are best-in-class even if we do end up exporting them to Latin America, Europe, et cetera, but the other really important feature is Abas and his team are looking for a partner to help them scale. The technologies they have can very easily be scaled for purchasing by OEMs in this country and globally as well as licensed to OEMs as well. So we see really two threads there one, keep the innovation pipe going. Okay, but then it bifurcates into how we use their technologies and how we can license and sell those technologies and products out to the broader automotive sector. Kristen Helsel: Alf, I think I can add some color here as well. What's most important Sean is we want Dr. Goodarzi and his team, his innovation team to keep doing what they're doing to staying at the forefront of the EV sector, the fuel cell sector and all of the things he has done to advance this industry over the last 30 years. What we really think that the second part where Ideanomics can provide some additional support is being able to leverage that commercial opportunity. So taking that huge catalog of products and things can start fully develop and putting those to work, not only in our products but lots of products in this country, and around the world. Sean Macdonald: Great well, that makes sense. I appreciate it. Alfred Poor: Thank you. Operator: There are no further questions at this time. I'd like to turn the floor back to Tony Sklar for any closing comments. Tony Sklar: Thank you very much, everybody. This is all the time that we have today, and this will conclude the Ideanomics' first quarter 2021 investors call. Our team is very excited for the rest of 2021. I think we have shown and demonstrated we have come to this particular Q with some very great numbers and excitement, and we will continued to allow our community to reach out with us. If you have any further questions individually, please don't hesitate to send those questions into ir@Ideanomics.com. We'd like to thank our listeners and shareholders, analysts and others who've taken the time to listen to this call. And we urge you to refer to our latest SEC filings for any information that you need. This call will be available from our website in the Investor Relations section you can find the link there. Don't forget to be alerted to our news, events and other information in the timely manner. We recommend you following us on all of our social media channels sign-up to our newsletter and explore our website at www.ideanomics.com. I am very excited as well to thank our marketing team and their efforts on not only our new branding, but the amount of content and creation that we are continuing to come with market in social media and other partners that we have brought along the way. Thank you everyone for participating in today's call. Thank you, operator? Operator: Ladies and gentlemen, this concludes today's web conference. You may now disconnect your lines at this time. Thank you for your participation and have a great day.
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Ideanomics, Inc. (NASDAQ:IDEX) Faces Challenges Amid EV and Fintech Sector Growth

  • Ideanomics has been charged by the SEC for misleading public about its financial performance, affecting its reputation and investor trust.
  • The company received a notice from Nasdaq regarding potential delisting due to non-compliance with listing requirements.
  • Despite challenges, Ideanomics is pursuing strategic initiatives in the EV sector, including partnerships for battery management solutions and efforts to diversify its business model through subsidiaries like Solectrac and WAVE Charging.

Ideanomics, Inc. (NASDAQ:IDEX) is a company that has positioned itself at the intersection of two rapidly evolving sectors: electric vehicles (EVs) and financial technology (fintech). Despite the growing global interest in these areas, Ideanomics has faced challenges that have impacted its stock performance and market perception. Notably, the company has been under scrutiny due to regulatory issues and financial performance concerns, which have influenced analysts' coverage and investor sentiment.

The Securities and Exchange Commission (SEC) charged Ideanomics with misleading the public about its financial performance between 2017 and 2019, a significant event that has undoubtedly affected the company's reputation and investor trust. This situation was resolved through a settlement, as reported by Reuters and other news outlets. Following these developments, Cantor Fitzgerald analyst Andres Sheppard set a price target of $1 for Ideanomics, indicating a cautious but not entirely pessimistic outlook on the company's future.

In addition to regulatory challenges, Ideanomics has also faced operational hurdles, such as receiving a notice from Nasdaq regarding potential delisting due to non-compliance with listing requirements. This notice was related to the company's failure to maintain the minimum required stockholders' equity and to file its quarterly report on time. These issues highlight the financial and regulatory difficulties Ideanomics has encountered, further complicating its path to recovery and growth.

Despite these challenges, Ideanomics continues to pursue strategic initiatives aimed at strengthening its position in the EV and fintech sectors. The company's majority-owned subsidiary, Energica Motor Company, has entered into a strategic R&D partnership with Electra, focusing on battery management solutions for electric two-wheelers. This collaboration underscores Ideanomics' commitment to innovation and its potential to impact the EV market positively.

Furthermore, Ideanomics' involvement in the electric vehicle sector, through subsidiaries like Solectrac and WAVE Charging, demonstrates its efforts to diversify and strengthen its business model. Solectrac's strategic reorganization to amplify electrification efforts and WAVE Charging's achievements, such as securing OEM approval for wireless charging integration in Kenworth's Class 6 electric trucks, are indicative of the company's potential to make significant contributions to the EV industry. However, the absence of analyst targets and the company's recent regulatory and financial challenges suggest that investors should approach Ideanomics with caution, conducting thorough research and considering the company's long-term prospects and ability to navigate its current difficulties.

Ideanomics, Inc. (NASDAQ:IDEX) Faces Challenges Amid EV and Fintech Sector Growth

  • Ideanomics has been charged by the SEC for misleading public about its financial performance, affecting its reputation and investor trust.
  • The company received a notice from Nasdaq regarding potential delisting due to non-compliance with listing requirements.
  • Despite challenges, Ideanomics is pursuing strategic initiatives in the EV sector, including partnerships for battery management solutions and efforts to diversify its business model through subsidiaries like Solectrac and WAVE Charging.

Ideanomics, Inc. (NASDAQ:IDEX) is a company that has positioned itself at the intersection of two rapidly evolving sectors: electric vehicles (EVs) and financial technology (fintech). Despite the growing global interest in these areas, Ideanomics has faced challenges that have impacted its stock performance and market perception. Notably, the company has been under scrutiny due to regulatory issues and financial performance concerns, which have influenced analysts' coverage and investor sentiment.

The Securities and Exchange Commission (SEC) charged Ideanomics with misleading the public about its financial performance between 2017 and 2019, a significant event that has undoubtedly affected the company's reputation and investor trust. This situation was resolved through a settlement, as reported by Reuters and other news outlets. Following these developments, Cantor Fitzgerald analyst Andres Sheppard set a price target of $1 for Ideanomics, indicating a cautious but not entirely pessimistic outlook on the company's future.

In addition to regulatory challenges, Ideanomics has also faced operational hurdles, such as receiving a notice from Nasdaq regarding potential delisting due to non-compliance with listing requirements. This notice was related to the company's failure to maintain the minimum required stockholders' equity and to file its quarterly report on time. These issues highlight the financial and regulatory difficulties Ideanomics has encountered, further complicating its path to recovery and growth.

Despite these challenges, Ideanomics continues to pursue strategic initiatives aimed at strengthening its position in the EV and fintech sectors. The company's majority-owned subsidiary, Energica Motor Company, has entered into a strategic R&D partnership with Electra, focusing on battery management solutions for electric two-wheelers. This collaboration underscores Ideanomics' commitment to innovation and its potential to impact the EV market positively.

Furthermore, Ideanomics' involvement in the electric vehicle sector, through subsidiaries like Solectrac and WAVE Charging, demonstrates its efforts to diversify and strengthen its business model. Solectrac's strategic reorganization to amplify electrification efforts and WAVE Charging's achievements, such as securing OEM approval for wireless charging integration in Kenworth's Class 6 electric trucks, are indicative of the company's potential to make significant contributions to the EV industry. However, the absence of analyst targets and the company's recent regulatory and financial challenges suggest that investors should approach Ideanomics with caution, conducting thorough research and considering the company's long-term prospects and ability to navigate its current difficulties.