May 16, 2022
Good morning. And thank you for joining us today to discuss the Results for Logiq's First Quarter 2022 Ended March 31, 2022.
Joining us today is Logiq's Chief Executive Officer, Brent Suen. Following his remarks, we'll open the call to your questions.
I'll provide some important cautions regarding forward-looking statements made by management during today's call. I'd also like to remind everyone that today's call is being recorded and will be made available for telephone replay following the instructions provided in today's press release.
At this time, while a few more listeners are dialing in, I will read the obligatory safe harbor statements. This teleconference contains certain forward-looking statements and information as defined within the meanings of Section 27A of the Securities Act of 1933 as amended and Section 21E of Securities Exchange Act of 1934, as amended, and is subject to the safe harbor created by those sections.
This teleconference may also contain a forward-looking statements and forward-looking information within the meaning of Canadian Securities Legislation that relate to Logiq's current expectations and views of future events. Any statement that expresses or involve discussions as to expectations, beliefs, plans, objectives, assumptions or future events or performances often but not always through the use of the words or phrases such as will likely result, are expected to, expects, will contain, is anticipated, anticipates, believes, estimated, intends, plans, forecasts, projections, strategy, objective and outlook are not historical facts and may be forward-looking statements that may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expected in such forward-looking statements.
No assurance can be given that these expectations will prove to be correct and such forward-looking statements included on this press release should not be unduly relied upon. These such statements speak only as of the date of this teleconference.
Forward-looking statements are based on a number of assumptions and are subject to a number of risks and uncertainties, many of which are beyond Logiq's control, which could cause actual results and events to differ materially from those that are disclosed or implied by such forward-looking statements. Logiq undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.
New factors emerge from time to time, and it's not possible for Logiq to predict all of them or assess the impact of each such factor or the extent to which any factor or combination of factors may cause results to differ materially from those contained in any forward-looking statements. Any forward-looking statements contained in this press release are expressly qualified in their entirety by this cautionary statement.
With that, I’ll now turn the call over to Logiq’s Chief Executive Officer, Brent Suen.
Thanks, Mike. And I wanted to thank everyone for joining our call today.
We're pleased to report that Logiq posted solid results for the first quarter of 2022. And this is despite a number of economic cross currents and unevenly fading COVID and certainly market volatility.
All of which makes companies a bit cautious to committing to their advertising budgets, but they also realize that they have no choice if they want to stay relevant and grow, and digital ad tech and lead generation offers a tremendous return on investment. Although we try to ignore the headwinds and while our team and the Board primarily set strategic direction, everyone else here just keeps grinding out the sales and implementation better each and every day.
On the surface, our performance this past quarter appears flat. However, I'll describe in a minute that actually it is a testament to our growth strategy and our ability to execute on key strategic initiatives.
As many of you already know, we are deeply committed to finding new avenues in new marketplaces in which we can leverage our domain expertise and advertising tech or ad tech as it's called and marketing technology or MarTech. So as both a manager and very heavily invested stockholder in the company for my own open market cash purchases at much higher prices, I'm well aware of the frustrations that many of you are feeling at the moment, and it's no consolation that practically all emerging growth stocks have been under historic pressure.
I am here to reassure everyone today that I remain confident in the solid foundation that we have laid over the past several months to set our business on a solid trajectory of revenue growth into margin expansion through this year and well beyond. And in the face of adversity, just know that I am doubly committed to developing and pursuing some very bold options to unlock the full value of our business.
I'll also add that our entire organization feels exactly the same and morale is the highest I've ever seen it. So for the first quarter, we reported solid consolidated revenues of $8.1 million, which is essentially flat with a year ago, although we brought operating expenses in the net loss down a bit.
So you're probably wondering how is a flat consolidated year over year result a good thing? Well, this is why, one year ago and our first quarter of 21 -- I'm sorry, 2021 results news release, I discussed that our Applogiq business segment, which we've rebranded as GoLogiq.
So let's refer to it as GoLogiq only now. It was pivoting the sales strategy away from higher volume, very low margin resellers and white label partnerships and aiming more towards higher margin, direct sales to customers.
Those sales had somewhat longer sales cycles as they required a certain amount of value-added consultative sales and relationship building. So broadly you can think of this as targeting retail sales versus selling into wholesale.
So here we are today, a year later, GoLogiq reported a 35.1% increase in revenues at $3.3 million. And the gross profit increased 46% to $1.1 million while its gross margin increased 230 basis points to a healthy 32.4%.
That clearly demonstrates that business succeeded in targeting higher margin in customers. So this year in 2023, goals for business are actually much higher.
The point that I'm making is that it took a year to begin harvesting the fruits of that retool business strategy and it worked. So what we're doing now is essentially the same thing.
We still believe that we're in the early innings for GoLogiq and the recently appointed dedicated management team. I expect that their strong momentum will continue throughout this year and next, and having GoLogiq proving out the direct-to-consumer sales business model.
I'm more confident than ever that Logiq itself will do equally well, if not better. It just takes some time and based on our current new business development pipeline, our internal model forecasts substantially stronger revenue and higher gross margins in the third and fourth quarters of this year.
So moving on to the Datalogiq business, which for all intents and purposes is Logiq right now. So in the quarter, revenues decreased about 15% from $5.6 million a year ago that was primarily to a shift away from lower quality business with lower gross profit margins.
Our March 31 total cash balance was 3.1 million versus 1.6 million on December 31, 2021. And like all companies, we've had limited resources and I've been directing the team to focus on consultative selling, direct-to-customer strategies which we expect will prove out solidly again in the third and fourth quarters of this year.
So as we incorporate our new strategy, we expect that our Datalogiq business will perform similarly to what we saw with the GoLogiq segment. As I discussed six weeks ago in our 2021 fiscal year report, our revenue is and will continue to be lumpy over the next several quarters since if just a couple larger orders slipped from one quarter to the next, it will move the needle.
So you can think of it as the law of small numbers, which we will outgrow as we add more customers and diversify that customer in vertical markets mix. We will grow, we will scale.
And we remain highly confident that our overall revenue and margin trajectory is positive and will strengthen throughout the rest of the year. I'll circle back on why we increasingly view our business and growth in terms of verticals.
But first I'll summarize first quarter operating highlights very briefly as we covered much of it in our fiscal year report, six weeks ago. So in the first quarter, we executed on several of our key business initiatives.
In January, we announced the transfer of the GoLogiq assets to Lovarra, an OTC traded company of which Logiq controls about 97% for our shareholders. Then that completes the separation of our Datalogiq and GoLogiq business into two publicly traded companies.
Logiq will continue to maintain its control position in GoLogiq until it distributes 100% of its shares to our shareholders of record from December 30 of last year. That's planned to close within a few months.
We've also applied to FINRA to officially change the name to GoLogiq and secure a new corresponding ticker symbol. It's currently LOVA and it's -- although the trading is nascent, it has traded up nicely, currently trading at 620 per share, which represents about 215 million market cap.
That's about 10x Logiqs right now. I want to emphasize that the separation of Logiq and GoLogiq strengthens both companies' ability to focus on business and close strategic accretive M&A deals in fast growing and highly fragmented industries.
Earlier in the first quarter, we also restructured our management to provide expert dedicated teams for both Logiq and GoLogiq to successfully navigate this divestiture and focused on a market strategy and our competitive positioning. Moreover, at the end of March, we announced the closing of the Battle Bridge acquisition.
The company is a rapidly growing leading boutique provider of digital brand marketing services, the certified partner of Google, Shopify, Bing ads, IMA and has been featured in a number of leading media sites and publications. And it definitely increases our content creation resources as well as broadens our consolidated service offering.
Currently, what we're doing is beginning the cross selling and upselling, and again, this is just recently initiated because we just closed just a few weeks ago. As we've built GoLogiq in no small part through M&A, we have proprietary templates and systems in place for integrating and consolidating these acquisitions.
So it should be no surprise that Battle Bridge is now largely consolidated in. The management team and -- our existing management team have already been evaluating new business proposals and exploiting cross-selling opportunities.
As we discussed in the deal closing news release, we anticipate booking 3.8 million in revenue just from Battle Bridge and about $1.4 million in EBITDA cash flow in the 12 months that began April 1. Our industry remains highly fragmented with several attractive acquisition or partnership targets offered at record low valuations as many of these businesses were negatively impacted by the pandemic and are struggling to regain their financial footing and marketplace footprint.
The solution to all of that is scale, and if done right, mergers and acquisitions can be a solution. I'm now going to take a couple of minutes to discuss verticals in the advertising tech and marketing tech business, because it's how I and our management team are thinking about our industry.
And I want all of you, our shareholders to be in sync with us on our business strategy. So our industry is all about vertical expertise and economies of scale.
Right now, 95% of our business is comprised of just four verticals. Home improvement is one, insurance, solar, and then a third is political and ancillary services.
Those are highly competitive because the revenue and the number of advertisers are absolutely there. So while we continue to grow those verticals organically and routinely evaluate value added bolt-on acquisitions for them, we are also currently evaluating high value added acquisitions or -- and indoor partnerships in other cyclically or fundamentally undervalued or underserved verticals with very strong rising tide potential.
So what do I mean by rising tide in this context? So if you look at some of the younger or cyclically depressed industries, such as cannabis or crypto.
Those business verticals spend about 2% of their total revenue on advertising and marketing. If you look at more mature industry verticals, such as the ones we're in home improvement, insurance, credit cards, consumer products, you'll see spending of about 12% of revenues.
So there's a huge, huge gap, because these industries that I mentioned are younger and newer, but over a very short period of time, you'll see advertising spending increased dramatically. The analysis that we've done definitely shows a solid trend for these industries to move up quickly to 3%, 4% or even 5% of revenues on ad spend and definitely higher over the longer term.
And if that happens, we would presumably double our revenue scale gross margins just by being there. So if you compare that with large hot verticals, that are highly competitive such as credit cards, real estate mortgages, which are crowded, noisy, and have the largest ad tech players willing to price below their cost to capture market share, and focus out marginal players.
That is not where we want to ever be. By focusing on underserved fundamentally or cyclically depressed verticals, we can partner with ad tech specializing in those verticals, but who are finding it difficult and expensive to scale up.
If you look at mergers and acquisitions, you can actually leapfrog over a number of those articles -- I'm sorry, obstacles. Within such verticals, we plan to capture significant market share leadership and acquire successful management teams seeking scale through smart synergistic business combinations.
While we actively evaluate various immature or cyclically depressed verticals, we actually like the undervalued regulated verticals for their high barriers to entry. So when I talk about regulated again, those industry verticals are cryptocurrency, okay?
Cannabis, online wagering, pharmaceutical, med tech and others, they require highly specialized expertise to effectively reach the target audience while navigating those regulations, which vary from state to state, month to month and are always subject to change. Once we successfully enter one of these regulated verticals, Adtech and MarTech tools in techniques required to succeed are largely fungible and easy to repurpose to enter other markets.
So if we're very strong in ad tech in a younger or cyclically depressed vertical like cannabis, we can scale and then very readily move to other regulated markets with the same tool sets. So their end lies a win-win opportunity for intelligently structured joint ventures and/or mergers and acquisitions.
So while I don't want to get it too far a field, you can deduce that we are making some very strong progress towards closing one or more such transactions this year. Although in this marketplace, there is never any assurance.
I can say that it doesn't get any easier at scale, which we compete. However, I can tell you that we've institutionalized our experience in successfully analyzing negotiating and closing deals, which we're getting pretty good at every day.
So I'd like to add in something here, legal counsel and our investment banker and underwriters council made it very clear that if a company such as ours was to pursue a strategy of filing an S1 confidential filing with the securities and exchange commission to undertake an IPO and simultaneously merge in one to two profitable and accretive industry specific leaders, and one of these verticals, it might be viewed as what's called seasoning the market. So I'm not saying that Logiq is going to file a confidential S1 to IPO and simultaneously merge in one to two profitable companies that are industry leaders, but it is absolutely possible to do that.
And a company that is trading on the OTC market has undergone a significant decline in share price, meets all the criteria for a senior exchange, but does not meet the minimum price requirement could very well do that. On a final note, we are reiterating our guidance -- I'm sorry, we are actually revising our guidance from our last call and tightening it up.
We project annualized revenue for this year to be in the range of about $40 million to $50 million. However, even though we've revised it downward a bit, we plan to reach a breakeven EBITDA run rate by the end of the year and achieve profitability by early 2023.
Our guidance for the year is also based on deal pipeline, which includes M&A, potential partnerships and client relationships. With that, I can take some questions.
So Mike, if you want to take questions, happy to answer some.
All right. Wow.
What a surprise. Okay.
Well, as many people do and it can be a little overwhelming, people do contact me by phone and email and text message. If you do that, just be patient because we've got over 4,000 shareholders.
There's probably about 400 to 600 who do actively contact me. So if I don't respond immediately just be patient.
I'll close by saying that as far as marketplace headwinds go, our management team has moved beyond COVID, beyond inflation, supply chains, wars, economic uncertainty, and all the rest. Because for us, it's just business as usual.
It's just another day and there will always be headwinds. We keep our heads down.
We push the business forward each and every day in line with our business strategy. And as I have mentioned, I've invested much of my own money into this business over the past eight years, and will continue to work tirelessly to uncover lucrative opportunities when they come about, hopefully before our competitors are even thinking about them in order to scale or penetrate various verticals, where we could dominate them with the right strategic moves and thereby increase our financial performance and enhanced shareholder value.
I'm fully confident that the future of our company is exciting. And we're only in the early stages of realizing the full potential.
Thanks for joining us this afternoon. And I wish everyone well.
Thank you. Mike?
That does conclude the conference call for today. We thank you for your participation, and ask you to please disconnect your line.