Tenet Fintech Group, Inc.OTCPK:PKKFF) First Quarter 2024 Earnings Conference Call June 7, 2024, 5:00 PM ET
Corporate Participants
Johnson Joseph – CEO, President and Director
Conference Call Participants
Cathy Hume – CEO, CHF Capital Markets
Cathy Hume
Hello Tenet shareholders. I especially want to thank everyone who has raised questions about our Q1 2024 financial results. My name is Cathy Hume with CHF Capital. I will be turning to Johnson Joseph, CEO of Tenet, for your questions regarding our Q1 2024 performance. Please note that we will only be answering questions related to the Q1, MD&A and financial statements. So unfortunately, we will not be able to answer all of your questions in this video.
Hello Mr. Johnson, are you ready to start the Q&A?
Johnson Joseph
Hi Cathy, Yes you are right, let’s try that.
Q&A session
Q – Cathy Hume
Okay. You said after your Q4 ’23 earnings release that you expect revenues from China to eventually recover. But what we saw in Q1 ’24 was quite the opposite. Do you still expect a recovery in China? If so, when?
Johnson Joseph
Yes, Cathy, I believe things will eventually recover in China, but not to the same levels that we were accustomed to pre-pandemic. What I want shareholders to keep in mind is that we are introducing an entirely different revenue stream in China, and that will take time. We will make some sacrifices. We will have to make certain adjustments and make decisions around resource allocation. So, for those reasons, we expect things to slow down in China over the next few months, but they will eventually recover, and data revenue will join transaction fee revenue, and we will see a steady increase in our revenue. Sort of bringing the company domestically, so to speak, but I don’t think that will happen until probably the third or fourth quarter of this year.
Cathy Hume
Okay. We were talking about company transitions. The company has been changing its revenue model for over a year. But since then, the company’s revenue has plummeted and its stock price is at an all-time low. Are you still convinced that this transition is in the best interest of the company and its shareholders?
Johnson Joseph
Again, Kathy, you’re right. I have no doubt at all that we’re doing the right thing here. Now, I realize that many shareholders who have been with this company for a couple of years remember when the company was doing over $100 million in revenue. But for some of our shareholders, those were the good old days. The stock price was at a completely different level than it is now. I understand that. But back when we were doing $100 million in revenue, my recollection is that the profit levels were barely breaking even. Ultimately, we’re going to be valued based on earnings per share, and this is something that I’ve emphasized repeatedly to some of our shareholders: we have to make profits — profits.
So the decision that we’re making now is to put the company in the best position to generate profits as quickly as possible. So you apply a multiple to earnings per share and that’s what determines the value of the company. So with the data stream, the data revenue stream that we’re introducing, we’ve calculated the profit margins. Profit margins are much more interesting than transaction fees. So that’s why we made the decision that we made. And again, I believe this is the best decision for Tenet shareholders and all stakeholders.
Cathy Hume
Okay. So my next question is really three-part: How did the delay in the financing impact your first quarter results? And secondly, is this delay impacting the company’s plans for the remainder of 2024? And when do you expect the financing to ultimately close?
Johnson Joseph
So, three questions. I’ll put the three together. Let’s start with the first question. First, we do believe that delays and fundraising impacted our first quarter results, but not as much as other factors, and frankly, maybe not as much as our previous fundraising, because our current fundraising was never intended to be funded by our China business. Meanwhile, our past fundraising, which we had problems completing, limited our ability to continue investing in growth opportunities in China.
So I would say that the last round of financing had a bigger impact on our first quarter results than the current round of financing. And so, to your second question, the delays have certainly impacted the operations of our Canadian business in 2024. That being said, timing-wise, we expect the financing to close. We’re hopeful that everything will be resolved by the end of this month, which is the end of June.
Cathy Hume
Ok, so in the MD&A it states that the networking and advertising pillars of the Business Hub are almost complete. These two pillars are expected to be the main traffic drivers to the Business Hub, but when are they finally scheduled to be launched?
Johnson Joseph
That’s a hard question to answer. I can’t give you a specific date for the realization of the network and advertising pillar. One thing I can say is that the network we’re building has applications and so on that can communicate with the network. There are also applications that allow bloggers to accept ads and start earning money that way. But what we’re doing has a layer of complexity that those standalone applications don’t have.
Everything we do is tied into a loyalty system, we use Cubeler points, so everyone knows that the service we provide to small businesses is completely free, so we provide them with pre-approved credit offers and ultimately the opportunity to network and promote their products and services and download market intelligence.
All of our market intelligence reports are provided free of charge. And by free, it’s based on Cubeler points, which you can earn, you can collect, you can redeem. All of this ties into the network and advertising, which makes what we’re doing a little bit complicated. Again, I’m not making excuses. One of the things we’re looking at is launching the network first and then advertising shortly after, rather than launching the two pillars at the same time. Either way, we’ll be sharing more with our market shareholders on that in the coming weeks.
Cathy Hume
Now, speaking of communications, Mr. Johnson, why hasn’t the company been as transparent about its operations as it has been in the past? Is it because of ongoing fundraising, or is it because of something else, or is it simply because there hasn’t been anything worth communicating to shareholders?
Johnson Joseph
Well, Kathy, I can assure you that things are moving forward. I’m sure there’s a lot we want to tell our shareholders, but we have to wait. We have to be cautious. So the short answer to that is, as soon as the capital raise closes, shareholders can expect more transparent and regular communications.
Cathy Hume
Okay. So if the company’s revenue model in China shifts to one where it makes money through the data of small and medium-sized businesses on its platform, does the decline in revenue so far mean that the company has less data available to use to make money in China?
Johnson Joseph
No, the two are not really related. The fact that our revenue went down does not necessarily mean that fewer companies are giving us access to their data in China. So there is no correlation there. So there should be enough data. Once we launch our first product, our ie-Pulse product, we will have enough data in China and we will be able to monetize that data as well.
Cathy Hume
Ok, so is expanding the Business Hub to the US a feasible goal for the company by the end of the third quarter?
Johnson Joseph
Yes, I repeat, that’s correct. Don’t forget that Business Hub is a website that can be accessed from anywhere in the world. Right? So there’s nothing stopping us from bringing small businesses in the U.S. and other parts of the world on board with your business. The reason we haven’t done that yet is because of the funding pillar. And it’s strictly about the funding pillar. Because the funding pillar uses data and analytics to match businesses with lenders.
But the lenders in that particular country, right? So, in any country where we operate, we need to make sure that the lending pillar is adapted to the lending rules of that country. So the short answer to that question is, absolutely yes. We have a plan, essentially, but the Canadian banking system and the credit system is very similar to the US banking system and the lending system. So, it won’t take us long to adjust the lending pillar to be able to expand into the US. So, that’s definitely a realistic goal and we plan to be in the US by the end of this year. We’ll just have to make a few adjustments to the lending pillar for US small businesses and US lenders.
Cathy Hume
Okay, great. Mr. Johnson, do you really think that by the end of this year, the business hub will be a global network, with members from Canada, the United States and China able to interact with each other? And do you think that by the end of 2024, we will also be getting revenue from the United States?
Johnson Joseph
I answered your question about expansion earlier, right? Of course. We are already in China, we are in Canada, and we will be in the US by the end of this year. That being said, the networking feature allows small business owners and executives in each country to communicate with each other, right? Once we enter the US, we will start collecting data from US-based small businesses. Again, after we launch our ie-Pulse product, we will start creating the index. Currently, we will start with the Canadian index. Once we get data from US companies, we will create the US index and we will be able to sell the product to US clients as well. The answer to both questions is yes.
Cathy Hume
Okay. That was the last shareholder question that we were able to answer. Mr. Johnson, thank you so much for taking the time for this interview and we wish you the best of luck for the rest of 2024. We look forward to a lot of exciting things. So, we’ll see you next time. Take care.
Johnson Joseph
Thank you so much, Cathy. I appreciate it and I’m looking forward to the next quarter.
Cathy Hume
We think so too. See you next time.
Johnson Joseph
bye bye.
