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Tingo Group, Inc. (TIO)·Q2 2023 Earnings Summary

Executive Summary

  • Net revenues reached $977.2M, up 8,072% year over year and up 14.8% sequentially; Gross profit was $346.0M and EBITDA was $283.1M, with management highlighting adverse USD conversion from a 66.4% Naira devaluation in June .
  • Export business (Tingo DMCC) commenced in May, generating $348.0M of Q2 revenue; management expects majority of DMCC revenues to be received in USD/reserve currencies, accelerating dollarization .
  • Board approved commencement of quarterly dividends; Central Bank of Nigeria processing conversion of $20M of Naira to USD for the first payment, with a stated goal to increase payments from next quarter .
  • Wall Street consensus estimates via S&P Global were unavailable for TIO (missing CIQ mapping), so beats/misses to consensus cannot be assessed; note to adjust models based on reported results and FX impacts [SpgiEstimatesError].

What Went Well and What Went Wrong

What Went Well

  • DMCC export revenue launched and scaled quickly to $348.0M in Q2; management expects significant H2 growth with USD receipts, supporting dollarization and reducing FX translation risk .
  • Strategic ecosystem progress: exclusive PCX/AFAN agreement securing produce supply and nationwide warehousing (2,322 sites, targeted to expand to 80,000 over two years), bolstering Tingo Foods and DMCC supply chains .
  • Management initiated quarterly dividends and emphasized shareholder value: “our commencement to pay a quarterly dividend marks an important part of our strategy for maximizing shareholder value” (CEO Darren Mercer) .

What Went Wrong

  • Currency devaluation (Naira down ~66.4% vs USD in June) materially impacted USD translation; despite sequential revenue growth, USD-reported results were adversely affected .
  • Cash and cash equivalents decreased to $53.2M at June 30, 2023, driven by heavy investments (handsets $434.2M; AFAN prepayments $336.1M; DMCC inventory $225.8M), tax payments ($174.0M), and FX losses .
  • Ongoing independent investigation into allegations increased operational/legal overhang; company engaged independent counsel and flagged risks, including potential restatements or control weaknesses in forward-looking statements .

Financial Results

MetricQ2 2022Q1 2023Q2 2023
Revenues ($USD Millions)$12.0 $851.2 $977.2
Gross Profit ($USD Millions)$2.073 $386.854 $346.016
Operating Income / EBIT ($USD Millions)$(13.770) $260.677 $181.713
Net Income attributable to Tingo Group ($USD Millions)$(14.337) $176.740 $96.508
Diluted EPS ($USD)$(0.11) $0.33 $0.18
EBITDA (non-GAAP) ($USD Millions)$(12.249) $372.157 $283.127

Segment / KPI highlights:

ItemQ2 2023Notes
DMCC Export Revenues ($USD Millions)$348.0 Commenced May 2023; majority expected in USD/reserve currencies
Handsets Purchased (units)6.0M (investment) Upfront payment $434.2M; delivery expected within 60 days
Nwassa Active Customers (Millions)>12.0 at June 30 From slide: “>12.0M Tingo Mobile active customers at June 30, 2023”

Cash and leverage context:

  • Cash and cash equivalents: $53.2M at June 30, 2023 vs $500.3M at Dec 31, 2022, reflecting heavy growth investments, taxes, and FX .
  • Notable Q2 payments: handsets $434.2M; AFAN produce prepayment/settlement $336.1M; DMCC inventory $225.8M; taxes $174.0M; total $1,170.1M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend PolicyQ3 2023 onwardNoneQuarterly dividends commenced; CBN processing $20M USD conversion; aim to increase payment from next quarter Initiated / Raised
Revenue DirectionH2 2023Not specifiedManagement expects “considerable growth” in H2 driven by DMCC exports and handset deliveries; majority of DMCC revenues in USD Qualitative positive
FX / Dollarization2023Not specifiedRemoval of FX restrictions expected to accelerate dollarization; USD conversion adversely impacted Q2 results due to Naira devaluation Qualitative positive
Tingo Foods FacilityMid-2024Mid-2024 startConstruction progressing; operations expected to commence mid-2024 Maintained

Note: No explicit numeric revenue, margin, OpEx, OI&E, tax-rate ranges provided in Q2 materials .

Earnings Call Themes & Trends

Note: Full Q2 2023 transcript was unavailable via tools; the call occurred Aug 31, 2023 at 8:00am ET (webcast details below) . Themes below reflect the Q2 presentation and press release.

TopicPrevious Mentions (Q4 2022 and Q1 2023)Current Period (Q2 2023)Trend
Dollarization & FXDMCC launched to dollarize earnings; strong cash balance at YE 2022 DMCC exports commenced ($348.0M); majority revenues expected in USD/reserve currencies Accelerating
Supply Chain & WarehousingAFAN/PCX agreement; 2,322 warehouses; plan to scale to 80,000 Exclusive PCX/AFAN agreement reiterated; warehousing and e-warehouse receipts to enhance trading Strengthening
Customer Growth (Nwassa)11.4M customers at Dec 31, 2022; target ~30M by Dec 2023 >12.0M active customers at June 30, 2023; 6M handsets ordered Growing
Product/Facility BuildTingo Foods planned $1.6B plant; mid-2024 start Construction progressing; mid-2024 commencement reaffirmed On track
Regulatory/LegalAdvisors engaged; market manipulation concerns Independent investigation engaged; forward-looking risk disclosures highlighted Elevated scrutiny
Payments/FintechTingoPay + Visa partnership in beta; Q1 testing Continued development; full launch targeted later in 2023 Advancing

Management Commentary

  • “The near 70% depreciation of the Naira against the U.S. dollar… has clearly had an impact on the U.S. dollar conversion of our results for the second quarter. Nonetheless, we have again delivered quarter on quarter revenue growth… our three core business verticals… are expected to deliver considerable growth in the second half of the year and beyond.” — Darren Mercer, CEO .
  • “Our Tingo DMCC export and commodity trading business… is expected to deliver significant growth in the second half of the year… the majority of Tingo DMCC’s revenues are expected to be received in U.S. dollars or reserve currency equivalents.” — Darren Mercer .
  • “Today’s announcement of our commencement to pay a quarterly dividend marks an important part of our strategy for maximizing shareholder value… it is our goal to increase the dividend payment from next quarter and thereafter.” — Darren Mercer .
  • “We have continued to expand the business… add two new product categories and also win a major new customer… I am delighted that we have today announced the commencement of a quarterly dividend…” — Dozy Mmobuosi, Founder & CEO of Tingo Mobile and Tingo Foods .

Q&A Highlights

  • The Q2 2023 conference call occurred Aug 31, 2023 at 8:00 a.m. ET; webcast link and replay were provided (conference code 13740949) .
  • Full transcript was unavailable via tools; Q&A details cannot be summarized. Agenda topics included financial results, product timelines, partnerships, and closing summary/Q&A per the presentation .

Estimates Context

  • Wall Street consensus estimates (EPS and revenue) via S&P Global could not be retrieved due to missing CIQ mapping for TIO; as a result, beats/misses versus consensus are not available [SpgiEstimatesError].
  • Implication: Model updates should incorporate reported Q2 revenue ($977.2M), EBITDA ($283.1M), diluted EPS ($0.18), FX devaluation impact on USD translation, and H2 growth commentary tied to DMCC and handset deliveries .

Key Takeaways for Investors

  • Sequential revenue growth (+14.8% QoQ) despite severe FX headwinds underscores underlying demand and scaling in DMCC and Tingo Foods; consider FX-normalized trajectory in models .
  • DMCC’s $348.0M Q2 revenue and USD receipts are strategic to reducing FX volatility and supporting dividend sustainability; monitor H2 export cadence and currency mix .
  • Aggressive reinvestment drove near-term cash drawdown (to $53.2M) but positions business for H2 growth (handset deliveries, inventory); track working capital and cash conversion .
  • Dividend initiation is a narrative catalyst; CBN USD conversion ($20M) and stated aim to increase from next quarter merit attention; dividend growth tied to USD dollarization .
  • Legal/independent review remains an overhang; company’s forward-looking risk disclosure includes potential restatements or control weaknesses; position sizing should reflect governance risk .
  • No numeric guidance ranges were provided; qualitative outlook suggests “considerable growth” in H2 from DMCC and handset rollouts; visibility depends on export execution and FX stabilization .
  • For trend analysis, Q1 2023 delivered $851.2M revenue, $372.2M EBITDA, and $0.33 diluted EPS; Q2 diluted EPS fell to $0.18 amid FX effects and reinvestment—track margin/earnings trajectory into H2 .

Supporting materials and key documents:

  • Q2 2023 8-K and press release, including exhibits and presentation .
  • Q1 2023 8-K press release and presentation .
  • FY/Q4 2022 8-K press release and presentation .

Earnings call access details:

  • Date: Thursday Aug 31, 2023; Time: 8:00 a.m. ET; Dial-in: 1-877-704-4453 (Intl: 1-201-389-0920); Webcast link provided; replay through Oct 1, 2023 .