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spk05: Greetings. Welcome to MFACE Technologies Earnings Conference Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during today's conference, please press star zero from your telephone keypad. Please note, this conference is being recorded. At this time, I'll now turn the conference over to Brian Prendevo. Please go ahead, Brian.
spk06: Thank you. Good afternoon, everyone, and welcome to M-Phase Technology's fiscal 2022 second quarter earnings conference call. As a reminder, the fiscal 2022 second quarter ended on December 31st, 2021, so all figures presented for this period will reflect that end date. Today, we issued our fiscal 2022 Q2 financial results press release, which highlighted a number of financial results for the quarter. A copy of the press release is available on the investor relations section of our website, and the completed financials are posted on EDGAR. Before beginning our formal remarks, I'd like to remind listeners that today's discussion may contain forward-looking statements that reflect management's current views with respect to future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward-looking statements. M-Phase does not undertake to update any forward-looking statements, except as required. At this point, I'm pleased to turn the call over to MFA's CEO, Anshu Bhatnagar. Please go ahead, Anshu.
spk04: Thank you, Brian. On behalf of the entire Empower team, a warm welcome to everyone who's joining us today. We'll get to some highlights for the quarter shortly, but I want to start with a slide showing our much-improved and expanded management teams. Building out our team has been a major focus over the last few quarters, and we now have the personnel on board to support our growth objectives during our EV charging installation stage. This was a thoughtful process as we are now staffed with industry experts in key areas such as renewable energy, automotive, and real estate that will be most important to building out our EV charging platform. Last quarter, We added a full-time CFO, Anjaliya Gratishan. And most recently, we added General Counsel and Corporate Secretary, Isida Touche, and Head of Sales, Soni Thakur. I invite everyone to spend some time on LinkedIn looking at the outstanding credentials of our entire team to see what a deep bench of talent we now have in place. Two key attributes of a successful company are are the business model and the people executing that model. At this point in our revenue cycle, we have more than proven that our business model works. We're building all our revenue streams from scratch, and we have a considerable amount of R&D and infrastructure costs, and we have still managed to be profitable or near break-even most quarters backing out non-cast charges since we commenced generating meaningful revenue. In Q2, we marked our 11th straight quarter of year-over-year revenue growth. So we are one quarter away from three straight years of maintaining that record. I don't intend to steal too much from Angelia as part of the call, but this rock-solid consistency is the foundation of our approach to our next growth driver, which is to roll out the world's first true EV charging ecosystem. We previously announced a corporate name change from M-Phase Technologies to M-Power Technologies. This is still on tap, but quite a bit slower getting through regulators than we anticipated. As for our corporate rebranding, we are now using a purple color theme and a distinct M-Power logo that will differentiate us in the marketplace. The accompanying slide shows the look of our Level 2 chargers with this rebranding in place. In terms of equipment, we are sourcing our chargers from multiple leading OEMs and have engaged with nationally recognized engineering, installation, and maintenance organizations to provide the necessary infrastructure role for our network of chargers. We are using charger OEMs that are familiar names in the industry, so our devices will be manufactured by the same companies supplying many of our competitors. Our value add is our software and platform, so this is an ideal situation where our hardware will be readily accepted wherever we go. We recently started our site work for our first charging location. Our goal is to have those first locations in place during the next quarter, completing a major milestone. This first set of installations will also mark our entry into the hotel vertical, giving us another definitive use case as we pursue additional business in the lodging industry. This is a very important development for us because hotel properties can handle large installations. And in this case, we'll be putting eight chargers per site. Our expansion plan is flexible and national in scope. We have multiple tracks targeting owner operator networks of food and fuel franchises, corporate retail chains, hotel and motels, and partnership opportunities with municipalities, government agencies, and utilities. Our other important track involves landowners, such as mall and strip mall operators, which tend to overlap some of the owner-operator clients who have locations in those types of properties. The beauty of our model is that we can put a pin in any part of North America that has the best near-term potential because we're building an ecosystem that blends non-charging and charging sites into a cohesive network. This is a major differentiator because it gives us the ability to place chargers in locations that might not be economical to other companies who rely solely on charging revenue or service fees to fund their business. For those of you who are new to our story, this slide shows a bird's eye view of our Empower ecosystem which seeks to monetize more points of contacts during day-to-day travel than any other EV charging company. All of our member sites get our consumer engagement software which enables them to target all consumers who download our app. Our software does the hard work for stores essentially directing the most likely customers to their locations in response to specific offers. When you add it all together every B2C Empower consumer has a circle of opportunity that travels with them enhancing their ability to get great goods and services that they want at the right time and place. Similarly Our retailer members seeking customers get access to a much larger pool of target customers, some of whom might be just randomly traveling near member locations. Our approach to EV charging is fundamentally different than other companies in the space. If you consider how early in the EV adoption timeline this industry is at, Roughly 3% of vehicle sales in the U.S. as of early 2022, it is important to understand that the problem of today will be fundamentally different than the industry needs out 2, 5, and 10 years from now. As this chart shows, most EV charging companies have some kind of differentiator, such as solar or advertising attached to their charging installation, but we are the only company with a consumer software stack. Anyone who has owned an EV in these formative years has lived through the modern equivalent of ancient traveler timing, the distance between each oasis. The Camel may have been switched out for a Tesla, but clearly the industry needs to put a lot more charging stations to solve range anxiety. And we intend to be part of that solution. But what happens when... the scarcity wanes and the charging landscape begins to fill in. And secondarily, what happens to the millions of businesses connected to travel-connected commerce who are facing an uncertain future from a sea change in fueling process? And then there's the quality of sites, with some devoid of any creature comforts. The very concept of fuel itself is even changing. as electricity has no real branding power. Early on, we took the approach that an ecosystem could function across all of these timeframes and work for more people than a hardware-based solution that simply draws a line between the two most obvious points, the charging station and the driver's seat. We describe our approach as EV+, which is a term synonymous with our mPower platform's ability to connect more entities into these cohesive networks. We decided to design an ecosystem that touches every possible point in the future EV landscape, including drivers who will not own an EV for many years. In that sense, We have started where EV charging will need to be when the industry matures and then work backwards to today. We were able to do that because we already had the travel and consumer engagement software and platforms developed and tested, representing years of development effort. When we put in our first chargers in the next quarter, we will be the only company to successfully close that loop with the future via complete ecosystems. That will put us years ahead of other charging companies in terms of a solution that serves consumers, EV manufacturers and EV owners, travel-oriented retailers, and green product companies simultaneously. If you're wondering how we even got into this space, the truth is the EV industry came to us. Based on our long history as a battery development company, many different kinds of EV companies began showing up at our door seeking partnerships, giving us an impressive cross-section of industry exposure and knowledge. When we layered our existing travel platform and consumer engagement software onto the problems we were hearing, we realized that our version of the ecosystem could satisfy the pending and current needs of more people than any other charging solution in the market today. Beginning in what is now our third quarter of fiscal 2022, we are moving into execution phase of our ambitious plan to build the world's first complete EV charging ecosystem. So the next few quarters are going to be some of the most exciting in our company history. At this point, I would like to turn the call over to our CFO, Angelia Grotyshyn, who will provide a detailed analysis of our Q2 results and the positive impact of some important subsequent action since the quarter's end.
spk00: Thanks, Anshu. While marking our 11 straight months of revenue growth is the highlight of Q2 results, our pay down of a million in convertible debt subsequent to quarter end, which we announced this week, is a key milestone that deserves attention in today's call. Prepaying any debt is a significant indicator of a company's financial health, but prepaying convertible debt is a particularly shareholder-friendly move because it cancels out potential future dilution, which in our case would have equaled about 5 million shares or about 5% potential future dilution. Our goal is to pay off the remaining balance of this note this quarter. It is great to see the positive effect of a solid quarter put into place so quickly. particularly in the face of big macro conditions in the form of Omicron and supply chain issues that affected many other companies last quarter. Our results once again show the impressive resiliency of our revenue streams against global macro events. In Q2, we posted record revenue of $8.3 million, a 9.2% increase over the prior year quarter. A majority of our revenue came from our SaaS technology platforms, and services, which generated $6.4 million of subscription revenue, $1 million of service and support revenue, and about $900,000 of application development and implementation revenue. We have an exceptionally strong recurring revenue base, with our subscription revenue representing about 77% of our total revenue. Although the amount was nominal, about less than 1% of revenue, we also booked our first consumer engagement subscription revenue under our Empower platform in December. That revenue stream may be starting small, but we expect it to be a meaningful source of new revenue by the end of this calendar year. Our goal for double-digit revenue growth in fiscal 2022 will be driven by that revenue source. Our quarterly revenue trend is on an upward slope, but we expect that trajectory to gain some real momentum in the second half of our fiscal year. Our trailing 12-month revenue reached a record $32 million this quarter. One area I would like to highlight is our gross margin, which has been in a steady upward trend for a number of quarters in a row. While these gross margin figures do not yet reflect the levels we expect to reach when we layer on additional FAS revenue, they do provide a measure of the kind of leverage in our operations, where even modest revenue increases can have a positive impact. Reflecting the positive momentum in our business, our stockholders' equity reached a record $12.9 million this quarter and continued its steady ascent. Digging a little deeper into our financials, it is important to note that we have been allocating significant R&D to AI and other related software to support our EV platform. Software development costs of about $300,000 reflect some of this effort. Our GNA also showed a sharp spike, up 123% to around 971,000. As we begin our infrastructure and charging network rollout stage, software development, hardware purchases, and installation expense make up the bulk of these extra expenses. Our salaries and benefits category actually dropped during the quarter by about 10%. So this figure should be expected to increase as our company grows in the future, and we add additional support personnel. We posted solid operating income of about 1.2 million, only down about 10% from the comparable quarter last year, despite significantly increased business development spending. Our bottom line results were adversely affected by non-cash charges this quarter. During the quarter, we had a large amortization expense of approximately $1 million due to non-cash debt related items being amortized over the term of the related debt instrument. This charge helped push our other expense line up by 310% year-over-year to nearly $1.3 million, obscuring what was otherwise a solid quarter and leading to a small loss of a little less than $100,000. We have the luxury of excellent quarterly cash flow to fund our development costs, so our burn rate during our launch phase is quite manageable. Now, every quarter, we get the question about our large receivables figure, but that is mostly a matter regarding timing. We typically receive large payments shortly after closing the books each quarter, so our collections are offset slightly from our quarterly filings. Our average receivables figure is much smaller between the quarter ends, than our filings may seem to suggest. At this time, I would like to turn the call back to Anshu.
spk03: Thank you, Angelia.
spk04: I would like to spend the remainder of today's call discussing some of the things that we will be working on over the next couple of months. This chart is a sample of the kinds of company and vertical that we're targeting. Our goal is to have a good sampling of partnerships and sites and operations in each of these verticals in order to create some excellent use cases leading to additional businesses with like-minded companies. Although the majority of our charging sites will be level two, we're also working on developing some more advanced level three sites with partners. Clearly, EV charging installation is our top priority, so we are ramping up pretty much every part of that process in order to populate our target areas with mPOWER devices. The one thing we have in abundance is locations with enough candidate sites to last not just months but years of deployment. Under our current model, each ED site will be complemented by potentially a dozen or more non-charging consumer engagement or marketplace-oriented sites. These sites will participate in our EV ecosystem in the process of supporting the viability of our EV installation sites during these early years when lighter utilization trends will be the norm across the industry. This is a tremendous advantage for our Empower brand, enabling us to go into locations that are below the EV traffic threshold of some other less profitable and narrowly focused EV charging companies. This distinction will give us the ability to offer highly competitive charging rates. We are finding that this kind of location flexibility is very attractive to potential partners, particularly with the utility and ESG sensitive entities who need to infill gaps in their coverage maps. But we don't plan to make ourselves just an off the beaten path provider. because we have a great selection of prime high-traffic locations where the charging revenue won't have to wait for local EV driver population to catch up. One thing that is sometimes forgotten is that we are gaining traction with franchises of major retail corporations and property owners who lease to these retailers. Our pipeline is filled with these kinds of sites. So we're expecting to be placing EV charging in parking lots of some major brands in the future, which will be a game changer for us in terms of our sales effort. That is a particularly exciting prospect that could also open doors to some corporate accounts. I haven't spoken much today about the ancillary parts of our ecosystem, such as 5G connectivity, solar, and other potential location services. For the simple reason that we need to get our consumer engagement and EV charging established across many sites as soon as possible first, before layering on additional services. We have planning underway for hundreds of chargers in our initial pipeline as part of our land grab phase. So our installation program will be pretty aggressive and focused through the remainder of 2022. But our ultimate goal is to be a green-oriented company that is recognized for promoting multiple products and services to service eco-friendly outcomes. One part of that effort where we have begun to experience some early traction is our marketplace initiative. where we have seen encouraging interest from the initial green products companies we have contacted during the launch phase. This effort is at an early stage but ahead of plan, so we may take steps to concentrate more resources in the marketplace vertical if trends continue, particularly if we land few of our larger targets. At this point, I would say we are pleasantly surprised and optimistic on where we can go with this marketplace idea once we gain some scale. If you look at our entire ecosystem, what we are doing from a big picture perspective is a direct response to global trends. The world is in the early stages of a shift in both production and use of energy, driven by network, computing, and artificial intelligence technologies. new forms of consumerization and delivery, and the rise of consumer engagement. This combination of complementary trends demands different sets of technology solutions, creating unique opportunities for new entrants like Empower. The mobility fuel cycle is changing to electrification. That is a given at this point. Add networking, computing, and artificial intelligence to the mix, and Empower already has the tools to carve out a very unique position in multiple verticals in this changing mobility story. We didn't cover every trend today, such as storage and solar, but suffice it to say that we are positioning ourselves with the right partners to create a checklist of products and services to fit each installation site and customer needs. For example, one area we are already exploring with technology partners is a concept of microgrids, which in its simplest form is basically the ability to go from unidirectional charging to a two-way street where energy is fed back into the grid or a property. Energy tied to mobility is changing the way that we will challenge many companies who do not have the necessary expertise to create a complete solution. That is the key takeaway from our strategy. We keep developing, licensing, and partnering to achieve the most complete solution set in the market today. Operationally, we have been pretty vocal in expressing our desire to uplift through major exchange, something familiar to those who have followed our company for a while. We are taking every necessary step to position ourselves for that move when the time is right. In January, we completed naming our independent board and all required committees. This week we filed a Schedule 14A, giving us an ability to effectuate a reverse stock split in order to meet the price thresholds for listing on illicit exchange. We urge all shareholders to support this measure in the upcoming vote as we believe the move to a larger exchange will unlock significant value. At this time, I would like to open up the call for Q&A.
spk05: Thank you. We'll now be conducting the question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to Remove your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.
spk01: Once again, that is star one. Thank you. Thank you. Our first question is from the line of Chris Jarosz with Dunlap Equity.
spk05: Please proceed with your question.
spk02: Andrew, well done on your work so far, especially on managing your capital is this heavy investment period. And you guys have done a great job collecting on that, paying down what you can. I just have a couple of questions. First is, when I think about the installations that you mentioned, you have, you know, you're going into hotels, you have thousands of potential sites. What is the concentrate? Are we talking about thousands of sites and thousands of customers? Are we talking about, you know, thousands of sites and tens of customers you can roll out pretty quickly? And then as we think about the sites you're ready to install in the short term, what kind of penetration is that on that customer? So if the customer is 100, you're going to 3%, 5%? What's that penetration look like? And then second, if you could expand a little bit on what the time frame is on this marketplace idea, I'd love to hear more. And that's it for me. Thanks.
spk04: Thanks, Chris. Yeah, so... Sorry, there's a lot of questions in there. So... As far as our rollout, yeah, we do have thousands of locations, but that actually is made up of thousands of underlying customers as well. I think the way we kind of are working on this deployment is we are working with partners to manage it, but the actual underlying contract is with the end location. So we will end up with thousands of customers there. as the thing rolls out and it's already, like we already have in this existing quarter, we already have close to 800 paying customers, right? So that made up our 1% revenue and that's gonna increase significantly over the coming quarters as we continue to roll out and in that we have a broad mix of different category types from QSRs, restaurants, hotels, convenience stores and gas stations. So that's kind of what it's made up of. You know, probably in the coming quarter, we'll probably give some guidance around the breakout of that mix. But as of right now, we haven't broken that out. And some of that will include some large names as well. We're actually working with corporate to make sure we can announce certain partnerships.
spk03: And I apologize, I forgot the second half of your question.
spk05: We've Lost our questioner. If you'd like to ask a question, please press star 1 at this time. We'll pause a moment to poll for questions.
spk01: Once again, to ask a question, you may press star 1. Anshu, we have no additional questions at this time.
spk05: Would you like to make some additional remarks?
spk04: Yes, so... So we set an ambitious goal for 2022 and are working hard to implement a strategy that we believe will put our company on the EV map this year. Our goal is to have the Empower name become synonymous with green technology and services, and we have a great game plan in place to achieve that goal. Thank you again for taking the time to join us for today's update. Thank you. This will conclude today's teleconference. And we disconnect your lines at this time.
spk05: We thank you for your participation and have a wonderful evening.
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