Tenet Fintech Group Inc. (OTCPK:PKKFF) Q1 2024 Earnings Conference Call June 7, 2024 5:00 PM ET
Company Participants
Johnson Joseph – CEO, President & Director
Conference Call Participants
Cathy Hume – CEO, CHF Capital Markets
Cathy Hume
Hello to all Tenet Shareholders and a special thank you to those of you that sent in questions about the company’s First Quarter 2024 Financial Results. My name is Cathy Hume from CHF Capital and I’ll be asking Johnson Joseph, Tenet CEO, your questions related to the Q1 2024 results. Please keep in mind that we will only be addressing those questions that relate to the Q1, MD&A and financial statements. So unfortunately not all of your questions will be answered in this video.
Hi, Johnson. Are you ready to start our Q&A?
Johnson Joseph
Hi Cathy, yes I am. Let’s do this.
Question-and-Answer Session
Q – Cathy Hume
Okay. You mentioned after the Q4 2023 results that you’re expecting revenue from China to eventually rebound. But what we saw in Q1 2024 was the complete opposite. Do you still expect things to pick up in China? And if so, when?
Johnson Joseph
Yes, Cathy, I still believe that things will rebound eventually in China, but although not at the same level that we were accustomed to prior to the pandemic. What I want to shareholders to keep in mind is that we are introducing a completely different revenue stream in China and that’s going to take time. It’s going to take some sacrifices. We have to make certain adjustments and we have to make decisions with regards to allocating resources, right? So for all of those reasons, I expect things to be slow for the next few months in China, but eventually I do expect them to pick up and eventually for data revenues to join the transaction fee revenues and kind of like take the company over to home so to speak. But I don’t expect that to happen until probably the third or the fourth quarter of this year.
Cathy Hume
Okay. You’ve been talking about a transition of the company’s revenue model for over a year now. But since then, the company’s revenues have melted and the stock price is at an all-time low. Are you still convinced that this transition is the best thing for the company and for its shareholders?
Johnson Joseph
Again, absolutely, Cathy. There’s absolutely no doubt in my mind that we’re doing the right thing here. Now, I realized that a lot of the shareholders that have been with the company for two, three years now. They remember the days when the company was generating over $100 million in revenue. But although those were, for some shareholders, those were the good old days. The stock price was at a different level. I get all of that. But when we’re generating $100 million in revenue, the profit levels were barely breaking even if I recall. Now ultimately, our company is going to be valued based on earnings per share, and this is something that I’ve been trying to hammer home to some of our shareholders, we have to get to earnings meaning profit.
So the decisions that we’re making right now is to put the company in the best position to generate profits as quickly as possible, so earnings per share you apply a multiple to that that becomes how the company is valued, right? So with the data stream, with the data revenue stream that we’re introducing, the profit margins, we’ve done the calculations, the profit margins are much more interesting than the transaction fees. That’s why we’ve made the decision that we’ve made. And there’s again, I know that in my mind that this is the best decision for the shareholders and for all stakeholders of Tenet.
Cathy Hume
Great, okay. So this next question has actually three parts to it. What impact, if any, has the delayed financing had on Q1 results? And secondly, is the delay affecting the company’s plans for the balance of 2024 and when do you expect the financing to finally close?
Johnson Joseph
Okay, so three questions, three-in-one. Let me start with the first question. So first of all, yes, I do believe that the delay and the financing has had an impact on Q1 results, but not at the level, as other things may have had, and maybe not as much as previous financings, to be honest with you, because the financing that we’re doing right now, the funds were never really meant to be allocated to Chinese operations. Whereas past financings that we had trouble closing did limit our ability to continue to invest in growth opportunities in China.
So I would say that the previous financing had more of an impact on Q1 results than the current financing. Now the second question, there is no doubt about it that the delay has had an impact on our operations of Canadian operations I would say for 2024. That being said we do expect the financing to close as far as the timing for that. We’re still hopeful that the whole thing will be behind us by the end of this current month, the month of June.
Cathy Hume
Okay, good. So the MD&A mentioned that the networking and advertising pillars of the Business hub were nearly completed. Understanding that those two pillars were expected to be the main traffic drivers to the business hub, when can we finally expect them to be launched?
Johnson Joseph
That’s a tricky one to answer. Listen, so I can’t give specific dates about the delivery of the networking and advertising pillars. One thing I will say is that, okay, so the network we’re building, yes, we have — there are applications out there that allow you to communicate to networking and so on and so forth. There are applications out there that may allow a blogger to accept advertising and start generating revenue that way. But what we are doing has a layer of complexity that those standalone applications do not have, right.
So everything that we’re doing is tied into a loyalty system. So we use Cubeler points. So everybody understands that the services that we provide to small and medium-sized businesses are completely free of charge right. So we match them with pre-qualified credit offers we’re eventually going to give them the opportunity to network to advertise their products and services and to download market intelligence.
Market intelligence reports all for free right when I say for free it’s based on a — it’s based on Cubeler points. So the Cubeler points are earned, they can be earned, they can be redeemed. So all of this ties into networking, it ties into advertising, which makes it a little bit more complicated what we’re doing. So again, I’m not making excuses here. One thing we’re considering doing is maybe launching, instead of launching both pillars at the same time, we may launch networking first and then shortly thereafter launch advertising. But in any event, we will have more communications about that to the shareholders in the market in the coming weeks.
Cathy Hume
Okay, speaking about communications, Johnson, why hasn’t the company been more transparent about its operations as it has been in the past? Is it because of the ongoing financing? Is it because of something else or simply because there has been really nothing worth telling shareholders about?
Johnson Joseph
Well I can guarantee you Cathy that things have been happening, so I think there’s plenty of stuff that we would like to tell shareholders about, but we have to wait. We have to be careful. So the easy answer to that is shareholders can expect more transparent and regular communications as soon as we close the financing.
Cathy Hume
All right. So if the company’s revenue model in China transitions to making money through the data of the small businesses on that platform, does the drop in revenue that we’ve seen mean that there will be less data available to the company in China with which we make money?
Johnson Joseph
No, the two are not associated really. So the fact that there has been a drop in revenue doesn’t mean that there are necessarily less businesses giving us access to their data in China. So no, there’s no tie-in to that. So there should be plenty of data. Once we launch the first product, the ie-Pulse product, we should have plenty of data in China to be able to start monetizing that data as well.
Cathy Hume
Okay, great. Is the expansion of the Business Hub to the US. By the end of this third quarter realistic objective for the company?
Johnson Joseph
Yes, again, absolutely. Keep in mind that the Business Hub is a website that can be accessed from anywhere around the world. Right? So there is really nothing preventing us from inviting small and medium-sized businesses in the US or in other parts of the world from joining the business. The reason why we have not done that yet is because of the financing pillar. And it’s strictly about the financing pillar. Because the financing pillar uses data and analytics to match businesses with lenders.
But lenders in that particular country, right? So we have to make sure that the financing pillar is adapted to the lending rules of whatever country in which we operate. So the short answer to that question is absolutely yes. We have plans basically, by the way the banking system and the credit system in Canada is very similar than the banking and lending system in the US. So making the adjustments to the financing pillar to allow us to expand to the US, should not take very long. So absolutely, it’s a realistic goal and we expect to be in the US by the end of this year. We just have to make some small adjustments to the financing pillar for US small medium-sized businesses and US lenders.
Cathy Hume
Okay, Terrific. Johnson, do you really see the Business Hub becoming a global network by the end of this year with members in Canada, in the US, and China interacting with each other? And would you expect to have revenue coming from the US, as well before the end of 2024.
Johnson Joseph
So I just answered the question about expansion, right? So absolutely. So I expect us to be, well, certainly we already are in China, we are in Canada, and we will be in the US by the end of this year. So that being said, the networking feature is what’s going to allow small and medium sized business owners and executives from each of these countries to communicate with each other. Right? So once we’re in the US, then that means that we will start to have data coming from the US-based small and medium-sized businesses, which again, after we’ve launched the ie-Pulse product, then we’re going to start making the indices. Right now we’re going to be launching with Canadian indices. Once we have data on the US businesses we’re going to have US indices and we’re going to be able to sell those products to US clients as well. So the answer to that question is yes and yes.
Cathy Hume
Great, okay. So that was the last question that we had from shareholders, that we could answer that is. So I just want to thank you, Johnson, for taking the time to do this interview and best of luck for the balance of 2024. There’s lots of exciting things we’re anticipating. So until next time, take care.
Johnson Joseph
Thank you so much for doing this, Cathy. Appreciate it. And I look forward to our next quarter.
Cathy Hume
So do we. Bye for now.
Johnson Joseph
Bye, bye.
