Micronet Enertec Technologies Inc. (MICT) CEO David Lucatz on Q4 2018 Results - Earnings Call Transcript

Apr. 02, 2019 10:08 PM ETMICT, Inc. (MICT)
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Micronet Enertec Technologies Inc. (NASDAQ:MICT) Q4 2018 Earnings Conference Call April 1, 2019 9:00 AM ET

Company Participants

David Lucatz - Chairman, President and CEO

Moran Amran - Finance Controller

Operator

Good morning and thank you for calling in to review MICT's 2018 Year End Results. Management will provide an overview of the results. Importantly, there is a slideshow presentation which management will use during their overview. This presentation can be found on the Investor Relations section of the Company’s website at www.mict-inc.com under Events and Presentations.

You may also access a PDF copy of the presentation by clicking the link in the Company’s press release regarding these financial results issued this morning and the clicking the second link, labeled year end 2018 Results. Callers accessing the PDF copy of the presentation will need to manually scroll through the slides as management goes through the presentation.

I will now take a brief moment to read the Safe Harbor statement. During the course of this call, management will make express and implied forward-looking statements within the Private Securities Litigation Reform Act of 1995 and other U.S. Federal Securities laws. These forward-looking statements include but are not limited to those statements regarding future product offering by Micronet Ltd, or Micronet.

The potential for more partnership agreements by Micronet with respect to its LTE product, the proposed timing for the closing of the transaction with BNN Technology PLC, or BNN, ParagonEX Ltd, and other third-parties and the belief that such transaction will create substantial value for MICT shareholders while also benefiting the merger partners and that we see demand continuing to grow for Micronet’s product as a electronic logging device or ELD mandate nears.

Such forward-looking statements and/or implications involve known and unknown risks, uncertainties and other factors that may cause actual results or performance to differ materially from those projected. The forward-looking statements contained in this presentation are subject to other risks and uncertainties, including those discussed in the Risk Factors section and elsewhere in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission, and in the Company’s annual report on Form 10-K, for the year ended December 31, 2018, to be filed with the Securities and Exchange Commission.

This communication is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any securities or the solicitation of any vote and any jurisdiction pursuant to the proposed transaction or otherwise, nor shall there’ll be any sale issuance or transcript securities in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a perspective meeting the requirements of the Securities act of 1933, as amended.

Subject to certain expectations to be approved by the relevant regulator or certain fact to be ascertain the public offer will not be made directly or indirectly in or into any jurisdiction where to do so would constitute a violation of the laws of such jurisdiction or by use of the mails or by any means or instrumentality including without limitation, fax, transmission, telephone or any internet, of interested or phone commerce or any facility of a National Securities Exchange of any such jurisdiction.

On February 5, 2019, Global Fintech Holding, Ltd., filed the registration statement on Form F-4 containing a proxy statement for MICT stockholders a perspective and other important information in connection with the proposed business combination. MICT urges investors and stockholders to read these materials carefully and in their entirety, because they will contain important information about MICT, GFH, BNN Technology PLC, ParagonEX, Ltd, and other parties the proposed business combination and other related matters.

Investors and stockholders may obtain free copies of these materials with the SEC through the website maintained by the SEC at www.sec.gov. In addition, investors and stockholders will be able to obtain free copies of the proxy statement by directing a request to MICT Incorporated, 28 West Grand Avenue, Suite 3, Montvale New Jersey, 07645. Investors and stockholders are urged to read the proxy statement, prospectus and other relevant materials before making any voting or investment decision with respect to the proposed business combination.

MICT and its directors and executive officers, may be deemed to be participants in the solicitation of proxies for the special meeting of MICT's stockholders to be held to approve the proposed business combination. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of MICT's stockholders in connection with the proposed business combination are set forth in the proxy statement/prospectus.

You can find information about MICT's executive officers and directors in its Annual Report on Form 10-K for the year ended December 31, 2018. After such filing, you can obtain free copies of these documents from MICT using the contact information above. The tender offer referred to on this call was convinced by BNN Technology PLC on February 5, 2019.

This call is for informational purposes only and does not constitute an offer to sell or purchase or the solicitation of tenders with respect to the shares of MICT. No offer solicitation purchase or sale will be made in any jurisdiction in which such an offer solicitation purchase or sale would be unlawful. The offering documents will contain important information about the tender offer and shareholders are strongly encouraged to evaluate carefully all information in the offering documents and to consult their investment in tax advisors before making any decision regarding the tender of their shares.

The tender offer statement including the offer to purchase the letter of transmittal, and other related materials, and the solicitation/recommendation statement of MICT on schedule 14D-9, are also be available to MICT's stockholders at no charge on the sec's website at www.sec.gov.

Please note that the date of this conference call is April 1, 2019 and any forward-looking statements that management makes today are based on assumptions that are reasonable as of this date, except as otherwise required by law, the companies under no obligation to and expressly disclaims any obligation to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.

On the call this morning, we have David Lucatz, Chairman, President and Chief Executive Officer of MICT; and Moran Amran Controller of MICT. And again as a reminder, management will be referring to a slide presentation that can be accessed via the Investor Relations section of the Company's site with the link in the press release. We will start with an opening message from David will give an overview of business developments for the 12 months ended December 31, 2018. Then we will move to review the numbers with Moran.

I will now turn the call over to David, who will begin the presentation on Slide 5. Please go ahead, David.

David Lucatz

Thank you. Good morning, everyone. We have some significant development into '18, which have the potential to change the direction of our company. In December of 2018, an acquisition agreement was entered into among MICT, BNN and ParagonEx, which contemplates that the proposed business combination shall close on or before May 16, 2019. In connection with acquisition agreement, BNN launched a tender offer to acquire up to 1,953,423 shares of MICT's common stock at the price of $1.65 per share on February 5, 2019 and had some of the tender offer to April 8, 2019.

Earlier in 2018, MICT successfully completed a recent transaction, the sale of our formerly wholly-owned subsidiary Enertec Systems 2001 Ltd or Enertec with Coolisys Technologies Inc or Coolisys for total effective transaction price of $8.7 million. This transaction added $4.7 million in cash and removed $4 million in Enertec from our balance sheet.

Moving to Slide number 6, we will review the 2018 financial results. Revenue for 12 months ended December 31, 2018 decreased by 23% to $14.2 million compared to revenue of 18.3 million in 2017. Gross margin increased to 25% in 2018 from 23% in 2017. Net loss attributed to MICT narrowed by 68% in 2018 to $2.6 million, as compared to $8.2 million in 2017.

Backlog was $1.36 million as of December 31, 2018, driven by contracts for Micronet's new Mobile Resource Management or MRM products including the TREQ-317 and TREQr5. We expect demand will continue to grow as the year demanded requirement deadline of December 2019 new in addition new MRM product are used by Micronet.

Moving to Slide number 8, we present the market the Micronet's MRM product biggest development. Micronet next generation LTE certification is nearly completed and orders have already been received. The marketplace is materializing nicely with Micronet having formally launched its commercial website. A few partnership agreements have already been signed and more are in the pipeline.

Micronet is seeing business development opportunity by exhibiting at industry trade shows including MATS and NAFA. Micronet is cooperating on the SmartCAM with strategic partner and finding it has been very well accepted by the market. Micronet is implementing its LTE customer acquisition with first sale of SmarTab LTE device was made to the Value Added Reseller or VAR channel.

I will now turn the call to Moran for financial review.

Moran Amran

Thank you, David, and good morning everyone. The next slide illustrates the revenue for 2018 as compared to 2017. Revenues were $14.2 million in 2018 at a growth of 23% on 18.4 million in 2017.

Slide 9 provides a detail breakdown of the numbers. Cost of margin was 35% in 2018 as compared to 23% in 2017. Research and development expense were relatively stable on a dollar basis, but up slightly on a percentage of sale basis as compared to the prior year. In 2018, selling general and administrative expense increased by 1.9 million to 7.9 million as compared to 2017, an increase of 32%.

Net loss attributed to MICT narrowed by 68% in 2018 to 2.6 million, as compared to 8.2 million in 2017. On a per share basis, MICT reported results of $0.81 per basic and diluted share continue in 2018 as compared to a loss of $0.45 per basis can diluted share from continuing operation in 2107.

Turning to Slide 10, on our balance sheet, we have 2.2 million in cash and cash equivalents, minus 0.6 million in working capital and 1 million in shareholder equity as of December 31, 2018.

I will now turn the call back to David.

David Lucatz

Thank you, Moran. MICT continued to maintain at 39.3% stake in Micronet. In addition, our merger and acquisition agreement between MICT, BNN and other third-party is currently proceeding according to schedule. Investors interested in more information about BNN tender offer may refer to the press release dated March 13, 2019 for more details. We believe this transaction is completed. We create substantial value for MICT shareholder by also benefiting our merger partners.

I would like to thank our dedicated employees. Thank you and I look forward to speaking with you in next quarter.

Question-and-Answer Session

End of Q&A

Thank you. This concludes Micronet Enertec Technologies fourth quarter 2018 results conference call. Thank you for your participation. You may go ahead and disconnect.

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