U.S. markets close in 49 minutes

Edited Transcript of SSC earnings conference call or presentation 16-Mar-20 8:30pm GMT

Q4 2019 Ideanomics Inc Earnings Call

NEW YORK Mar 18, 2020 (Thomson StreetEvents) -- Edited Transcript of Ideanomics Inc earnings conference call or presentation Monday, March 16, 2020 at 8:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Tony Sklar

Ideanomics, Inc. - VP, Communications and IR

* Alfred Poor

Ideanomics, Inc. - CEO

* Conor McCarthy

Ideanomics, Inc. - CFO

================================================================================

Conference Call Participants

================================================================================

* Derek Hodgekins

- Private Investor

* Alan Stone

Wall Street Research - Analyst

* David Joseph

- Private Investor

* David Lulloff

- Private Investor

* Tim Moynihan

Janney Montgomery Scott - Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Greetings and welcome to the Ideanomics Q4 2019 conference call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Tony Sklar. Please go ahead, Tony.

--------------------------------------------------------------------------------

Tony Sklar, Ideanomics, Inc. - VP, Communications and IR [2]

--------------------------------------------------------------------------------

Thank you, operator, and welcome to the Ideanomics Q4 and 2019 earnings conference call. Joining me today, I am pleased to have Mr. Alf Poor, Chief Executive Officer, and Mr. Conor McCarthy, Chief Financial Officer.

A webcast of today's call will be archived and available in the events and presentations section of our corporate website for a minimum of 30 days. As a reminder, this conference is being recorded.

During the call, we will be making forward-looking statements such as dialogue regarding our revenue expectations or forecasts for the quarters and fiscal year 2019 and 2020 related to our business. These statements are based on our current expectations and information available as of today and are subject to a variety of risks and uncertainties and assumptions.

Actual results may differ materially as a results of various risk factors that have been described in our periodic filings with the SEC. As a result, we caution you against placing undue reliance on these forward-looking statements. We assume no obligation to update any forward-looking statements and as a result of new information or future events except as required by law. In addition to other risks are more fully described in Ideanomics' public filings with the US Securities and Exchange Commission, which can be viewed at www.SEC.gov.

Today, March 16, 2020, the Company filed its 10-K with the SEC and afterwards issued the press release announcing its financial results. So if participants on this call who may not have already done so may wish to view those documents as we provide a summary of the results on this call.

The format of today's call will be as follows: Mr. Alf Poor, our CEO, will speak to the Company's overview and business strategy as well as activities and developments for the fourth quarter and fiscal 2019. Mr. Conor McCarthy, our CFO, will speak to the Company's operating and financial results for the fourth quarter and the year end 2019. And then everybody's favorite: the Q&A session.

I will now hand the conversation over to Mr. Alfred Poor of Ideanomics, CEO.

--------------------------------------------------------------------------------

Alfred Poor, Ideanomics, Inc. - CEO [3]

--------------------------------------------------------------------------------

Thank you, Tony, and thank you to everyone joining our call. 2019 saw us complete the business transformation which began in 2018. We have taken important steps to focus our Company on two transformative industries, which we are confident will provide us both near-term and long-term revenues and the subsequent increase in shareholder value. Those two industries are electric vehicles and financial services.

At this point, I'd like to begin with a short review of 2019. We packed a tremendous amount of activity into 2019 and we are proud of what we have achieved as a result. We made a broad and concerted effort to ensure the foundation for growth was solid and scalable. There were significant challenges, as any business in transformation faces, but ultimately the Company is positioned with a much stronger platform for growth as a result of our activities in 2019.

The most significant development in 2019 was the formation of our mobile energy global division. MEG serves as a catalyst for change in one of the world's most environmentally sensitive areas of industry, which is the vast fleets of commercial vehicles that keep our economies moving at all levels, locally, nationally, and globally.

Enabling commercial fleet operators to shift from gasoline and diesel-based vehicles into clean energy-saving electric vehicles helps us in two key areas. First, it helps preserve our natural environment by mitigating the pollutants released from vehicles powered by fossil fuels. Second, it provides the fleet operators with tremendous return on investment from their largest operating expense, which is fuel costs. The cost of running an EV fleet is several times less when compared to running an equivalent fleet of trucks powered by gasoline or diesel.

That's the benefit for the fleet operator and the environment, of course, but I'd like to speak now about the benefits of this activity for MEG and Ideanomics. MEG's focus is in the acquiring of large-scale commercial fleet operators through vehicle procurement and financing services that we offer so that we can position the Company to take advantage of the opportunity and the money to be made in the shift of energy consumption as it moves away from fossil fuels and into clean electricity.

We decided to focus on commercial fleets as it provides us with a level of scale and profitability which cannot be achieved in the consumer vehicle market at this time. The commercial fleet segments we focus on are heavy trucks, buses and coaches, logistical vans and small trucks, and taxis. We believe these represent the major opportunities in commercial fleet transitioning to EV.

In terms of customer acquisition, MEG attracts fleet customers by providing services to help educate them on the benefits of EV and then support their transition to electric vehicles with discounted vehicle procurement, best-of-group volume buying, and financing services. Once a fleet operator becomes a MEG customer, we intend to market them prepaid electricity through our utility and energy partners to help reduce the running costs of their electric vehicle fleet. Our energy and utility partners also enable MEG to participate in the sale of metered electricity via EV charging station networks.

To help develop MEG for growth, we hired industry executives from the EV automotive, financial services, EV battery, and electrical energy storage and management industries to run our China operations. And we announced the MEG sales hub in the coastal port of Qingdao as well as partnerships with leading automotive and EV battery manufacturers. And of course, energy partners including GCL, Three Gorges, and PetroChina.

We have also begun building out the initial functionality of a proprietary management platform for MEG, which we will develop into a cloud-based destination for commercial fleet operators, manufacturing and financing partners, and others. And this will serve us as a strategic customer acquisition and retention tool.

This platform is being spearheaded by Matt Fogel from a product perspective and Nick Urmach in our development team in the Ukraine from a technical perspective. We have been very impressed with Nick and his team since the CommentsRadar acquisition in February of 2019. They have helped us with website and systems implementation across the Group and we see them as a core part of the Ideanomics team going forward.

Equally as significantly for MEG, we have sourced the lifeblood of EV enablement, which is access to capital. We partner with insurance companies and utility companies to form large-scale lease financing funds that will provide the liquidity needed to support the financing needs of commercial fleet operators.

We also began our ex-China strategy with the acquisition of a controlling stake in Malaysia EV manufacturer and distributor Treeletrik, which will be our growth platform for the ex-China Asia region and for which we are planning an IPO in late 2020, assuming favorable market conditions.

Finally in terms of MEG, we will build a diverse pipeline of orders and opportunities covering each of the four commercial vehicle segments, leveraging our team's network and the strategic partnerships and JVs we have established over the past 18 months. In addition to our direct sales, these partnerships help us source order flow directly from their fleet operator customers and have generated a consistent level of inbound inquiries.

This acquisition of commercial EV fleet customers provides us with opportunities to an upfront revenues and vehicle procurement buying spreads and origination fees from financing services and extends the customer lifecycle through long-term recurring revenues from the consumption of electrical energy. For those following with the slides online, for your reference, slides 5 and 6 provide more details on our deal announcements and MEG's revenue model. I won't go over further details on this now, but these are available for you to download.

I'd like to speak now about Ideanomics Capital. Ideanomics Capital is our division focused on the potential disruption to financial markets by the types of technology that we invest in. We believe that these technologies have the potential to disrupt and improve financial services in areas including trading systems, market performance indicators, portfolio management, and customer portfolio attrition as well as the downstream regulatory and compliance services which can be improved through greater transparency and controls.

We have two primary assets in this division: Intelligenta and the Delaware Board of Trade, or DBOT as we call it, as well as some minority investments and partnership agreements with exciting companies such as Liquefy. We have begun to position Ideanomics Capital in a similar manner to MEG by building out a platform for growth and scalability.

The digitization of securities is still under review with regulatory bodies globally. And every player in this space is focused on the one thing which can bring this industry to the mainstream and that is the approval for secondary market trading in digital securities. In the US, we call that Reg A+. Until such approvals are available, we anticipate the digital securities market to remain low growth. We recently decided to reorganize DBOT and get it out of the low-margin over-the-counter equities trading market.

On that note, I would like to mention that we did not acquire the DBOT ATS with the intention to remain in the OTC trading market. So this is not a deviation from our plans; rather a decision to take action perhaps sooner than previously discussed as the market is quickly adapting away from the DBOT model for that line of business.

The industry has been suffering from consolidation and feed compression for the last several years, and adding in the recent development of zero-dollar trading, OTC trading business is growing untenable. We plan to expedite the repurposing of the ATS for other types of trading and we will be able to speak further to that in the coming weeks and months as we gain the approvals required to do so. We mentioned on our Q3 earnings call that we will be looking to divest all non-core assets and the negotiations to conclude those deals are being worked on at this time.

Lastly, I would like to speak about COVID-19 coronavirus as we have active operations in several countries impacted by the outbreak. I am going to speak briefly and concisely about the coronavirus and the impact on our business. Obviously China has been impacted the most to date and we see in the US we are starting to get an understanding of what that country endured in the past couple of months. Our staff in China have been working remotely since just before the Chinese New Year break and we are thankful that we do not have any staff infected at this point in time.

At the time of the outbreak, our Chairman, Dr. Bruno Wu, and his family were in a part of Japan which has not seen any coronavirus activity. And they have since traveled to the US, where they remain at this time. Our Treeletrik team has remained largely operational throughout, with relatively limited cases in Malaysia, which is helped by its hot and humid climate. Although the government there took some additional measures today, similar to what we are seeing here in the US. So a remote working plan was put in place for them today.

Our teams in the US have all been advised to work remotely since last week. And our offices in New York are temporarily closed as there has been a positive case of COVID-19 in the building this past week. Our offices are being sanitized with Clorox 360 cleaning agents and will remain closed for at least the next two weeks. I want to reiterate the case in our building was not an Ideanomics employee.

Similarly, our development team in the Ukraine has been asked to work remotely as there are a number of positive cases in their city. In each case, we are fortunate to be a young company with modern infrastructure. That means that our networks, our VPN, emails system, and critical software services required to run the business are all in the cloud and accessible to our staff so long as they have an Internet connection.

In terms of our first quarter, the coronavirus has impeded order deliveries in China due to strict quarantine conditions that were in place in most major cities over the last two months. We do expect some level of revenues in Q1, which are being worked on at this time. And we further anticipate things beginning to return to something closer to normal in Q2 as the warmer weather begins to slow down the impact of the virus.

That said, we would like to expect -- set expectations that China has only return toed work in the past week or so and that there still remains a lot of travel restrictions in China. Despite this, our team in China and our partners have been resolute and determined to conduct business as best they can. And we have to say a special thank you to our staff, partners, and customers for all applying the focus to get some level of business done in what has been extremely demanding circumstances.

While it has been tough to witness, our shareholders should be encouraged by the fact that our staff and partners have been attending numerous meetings and conference calls in China wearing face masks and protective clothing trying to ensure we limit the impact of the outbreak on our business.

Likewise, the SEC provided additional flexibility in terms of reporting to those companies impacted by coronavirus. And while we have certainly been impacted as much as most, our finance teams in New York and Beijing and our auditors have gone over and above to ensure we met our original filing date today. The effort and determination put in to do so will be lost on a lot of people listening into the call today, but I believe it warrants a level of acknowledgment in line with the professionalism and dedication they have shown. So a big thank you on behalf of the entire Ideanomics family to Conor McCarthy and his finance team as well as to our auditors and accounting partners.

Tony, back over to you.

--------------------------------------------------------------------------------

Tony Sklar, Ideanomics, Inc. - VP, Communications and IR [4]

--------------------------------------------------------------------------------

Thank you so much, Alf and Conor. Absolutely it is my pleasure to introduce and turn the conversation over to our CFO. Conor, please, it is your show now.

--------------------------------------------------------------------------------

Conor McCarthy, Ideanomics, Inc. - CFO [5]

--------------------------------------------------------------------------------

Thank you, Tony, and welcome to everybody on the call. And thank you, Alf, for the kind words. As Alf discussed earlier, 2019 saw us complete the business transformation which began in 2018. We have taken important steps to focus our Company on two transformational industries which we are confident will provide us with both near- and long-term revenues and the subsequent increase in shareholder value. These two industries are electric vehicles and financial services.

The financial statements for the year ended December 21, 2019, include a significant number of one-time nonoperating non-cash items incurred as part of the management's work to transition the business. I will discuss these further in my remarks.

Revenues. For the full-year 2019, the Company generated revenues of $44.6 million as compared to $378 million in 2018. The revenues for 2019 and 2018 are not readily comparable as they come from very different industries with very different profit margins. The 2019 revenues were generated from digital asset management services and the first revenues from our new electronic vehicles business. The 2018 revenues were generated from oil and electronic components trading, both high-volume low-margin industries that we exited in 2018.

The digital asset management services revenue were earned in the first and second quarter of 2019. There were no revenues from this contract in the third and fourth quarters and we do not anticipate any revenues from this activity in 2020.

Our gross profit for the year ended December 31 was $43.1 million versus $3.1 million in 2018, an increase of almost $40 million. The gross margin for 2019 was 97% as compared to 1% in 2018, echoing my earlier comments that we have transitioned out of the low-margin business in 2018 into higher-margin businesses in 2019 and going forward. Total operating expenses for 2019 were $111.7 million versus $29.4 million in the prior year, an increase of $82.3 million, which was largely driven by one-time nonoperating non-cash charges as we transition the business.

We performed a review of our holding of GTB Cryptocurrency and concluded that a combination of a very large decline in the quoted price of GTB versus the US dollar and the inability to convert GTB into fiat, despite huge efforts to find a mechanism for converting, led management to conclude that we should impair our holdings of GTB at a cost of $61 million. There were smaller impairment costs arising from the demolition of buildings at Fintech Village and the write-down of assets that are no longer core to the direction of which the business is moving.

The loss from operations for the year ended December 21, 2019, was $68.6 million, which includes the asset impairment charge of almost $74 million and earnout expenses in relation to our acquisition of the Delaware Board of Trade of $5.1 million. Without these one-time charges, the Company would have recorded an operating profit of $10.2 million, equal to a pro forma operating margin of 23%.

Finally, I would like to briefly discuss the interest expense number. Interest expense for the year ended December 31, 2019, was $5.6 million versus $800,000 in the prior year. The large increase in interest expense is due to the US GAAP accounting treatment for the convertible note funding we engaged in during 2019. Interest paid in cash was $73,000, so the bulk of the $5.6 million is a non-cash US GAAP accounting charge which is reported as interest.

To conclude, the financial results for the year ended December 31 include a large number of one-time non-cash nonoperating charges which reflect the work that management has done to position the business for very significant opportunities in the electric vehicle market in China and the ASEAN countries.

Back to you, Tony.

--------------------------------------------------------------------------------

Tony Sklar, Ideanomics, Inc. - VP, Communications and IR [6]

--------------------------------------------------------------------------------

Thank you so much, Conor. This concludes management's prepared remarks. And I am very excited to get everybody ready for our investor and analyst question-and-answer period call. Kevin, operator, could you please give the instructions to the audience?

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) [Derek Hodgekins], private investor.

--------------------------------------------------------------------------------

Derek Hodgekins, - Private Investor [2]

--------------------------------------------------------------------------------

Hi. Just looking at your balance sheet here, just wondering. It shows $22.6 million in long-term investments. I was wondering if you could give me some color on that.

--------------------------------------------------------------------------------

Alfred Poor, Ideanomics, Inc. - CEO [3]

--------------------------------------------------------------------------------

Conor, would you like to field that?

--------------------------------------------------------------------------------

Conor McCarthy, Ideanomics, Inc. - CFO [4]

--------------------------------------------------------------------------------

Sorry, I was on mute. I didn't hear that question.

--------------------------------------------------------------------------------

Derek Hodgekins, - Private Investor [5]

--------------------------------------------------------------------------------

I was just wondering about the $22.6 million in long-term investments and what that is made of.

--------------------------------------------------------------------------------

Conor McCarthy, Ideanomics, Inc. - CFO [6]

--------------------------------------------------------------------------------

Sure. Just trying to find my work paper on that. So if you give me one moment, I will come back to that question.

--------------------------------------------------------------------------------

Derek Hodgekins, - Private Investor [7]

--------------------------------------------------------------------------------

No problem.

--------------------------------------------------------------------------------

Tony Sklar, Ideanomics, Inc. - VP, Communications and IR [8]

--------------------------------------------------------------------------------

Okay, we will take the next one in line.

--------------------------------------------------------------------------------

Operator [9]

--------------------------------------------------------------------------------

Alan Stone, WallStreet Research.

--------------------------------------------------------------------------------

Alan Stone, Wall Street Research - Analyst [10]

--------------------------------------------------------------------------------

Yes, thank you, Tony, Alf, and Conor. So it seems that most of the loss for last year was from one-time charges or write-downs or non-cash charges. Is it fair to say that as we are now in 2020 that the Company is having positive cash flow?

--------------------------------------------------------------------------------

Alfred Poor, Ideanomics, Inc. - CEO [11]

--------------------------------------------------------------------------------

Thank you, Alan. Thanks for the question.

--------------------------------------------------------------------------------

Conor McCarthy, Ideanomics, Inc. - CFO [12]

--------------------------------------------------------------------------------

I think the reality is we are still very much in an investment mode. We have high hopes that our electronic vehicle business in China will become cash generative in sometime this year. But our operations in the US are still going to require funding because as we build out our DBOT business -- and also, this is the corporate head office, which is responsible for most of the public filings.

--------------------------------------------------------------------------------

Alan Stone, Wall Street Research - Analyst [13]

--------------------------------------------------------------------------------

Okay. And also could you address the intangible assets on the balance sheet? I know that used to -- and the goodwill. I know that used to include some of the cryptocurrency assets. Or the is that still carried under that segment?

--------------------------------------------------------------------------------

Conor McCarthy, Ideanomics, Inc. - CFO [14]

--------------------------------------------------------------------------------

No, we wrote off our cryptocurrency entirely at the end of this year. And that was the largest single impairment charge we took of $61 million. The other goodwill relates to our investment in Malaysia and our investment in DBOT principally.

--------------------------------------------------------------------------------

Alan Stone, Wall Street Research - Analyst [15]

--------------------------------------------------------------------------------

Okay. And the intangibles?

--------------------------------------------------------------------------------

Conor McCarthy, Ideanomics, Inc. - CFO [16]

--------------------------------------------------------------------------------

The intangibles relate also to DBOT, where we have some long-term contracts, trade names, and things like that.

--------------------------------------------------------------------------------

Alan Stone, Wall Street Research - Analyst [17]

--------------------------------------------------------------------------------

Okay, thank you.

--------------------------------------------------------------------------------

Operator [18]

--------------------------------------------------------------------------------

David Joseph, private investor.

--------------------------------------------------------------------------------

David Joseph, - Private Investor [19]

--------------------------------------------------------------------------------

(technical difficulty) moving very quickly with a lot of --

--------------------------------------------------------------------------------

Operator [20]

--------------------------------------------------------------------------------

Mr. Joseph, would you mind repeating your question. I do apologize. Go ahead.

--------------------------------------------------------------------------------

David Joseph, - Private Investor [21]

--------------------------------------------------------------------------------

No problem. Hello, I am wondering are there any other competitors in the electric vehicle financings sector in China? I notice that there has been a lot of news coming through and excellent work, gentlemen. But are there any other competitors in that space?

--------------------------------------------------------------------------------

Alfred Poor, Ideanomics, Inc. - CEO [22]

--------------------------------------------------------------------------------

This is Alf Poor. Thank you for your question, David. The EV financing space has been a very interesting one. Last year we were confronted with the fact that partners that we had previously secured in the latter half of 2018 were unable to fund the EV in a similar manner to what they had been funding internal combustion engine vehicles. Primarily because the battery and the battery pack within the vehicle is such a large part of the cost of the vehicle. In a Tesla, it's around 35%. In a bus or a large truck, it could be 55%. So the fleet operators are typically not used to having to pay the types of deposits that the financing industry was looking for.

I can tell you that at this point, we are not aware of any direct competitors as we have set up these large liquidity pools to do the lease financing. But the capital markets are very efficient, so I am sure where there is money to be made there will be competitors in the future. But we continue to receive inbound inquiries for people that are unable to place financing for EV commercial vehicles at this time.

--------------------------------------------------------------------------------

David Joseph, - Private Investor [23]

--------------------------------------------------------------------------------

So you would then -- we could say that you are the first to market with regards to this business plan or structure?

--------------------------------------------------------------------------------

Alfred Poor, Ideanomics, Inc. - CEO [24]

--------------------------------------------------------------------------------

I think it's fair to say that we couldn't find any partners to work with us in China. So we effectively went out to a consortium of utilities and insurance companies, people with cash on their balance sheet who typically buy corporate debt. And we asked them to help us fill the space in the marketplace. So while we are not aware of any at this point, we feel we do have a first-mover advantage. Like I said, the capital markets are pretty efficient when people start to see us making money. I am sure competition will come and is welcome.

--------------------------------------------------------------------------------

David Joseph, - Private Investor [25]

--------------------------------------------------------------------------------

Absolutely. And then I read in a news release back in 2018, I believe it was in September, that you -- the Company was coordinating or organizing an electrification fund and it was in the $6 billion mark. I trust -- and I saw that also in your announcement -- previous announcements. Is this fund still being put together or is it close to being completed? And I gather this is the fund that is going to be doing that leasing, etc.

--------------------------------------------------------------------------------

Alfred Poor, Ideanomics, Inc. - CEO [26]

--------------------------------------------------------------------------------

Yes, this is one of the funds that will be doing the leasing. At the moment, we have set up two liquidity pools of about RMB100 billion each. These are not our funds; obviously, these are the funds that belong to, for want of a better term, LPs. So they are supplying the funding to the lease financing.

As part of that, we are going to be providing RMB6 billion of that to First Auto Loan, which was one of our partners who previously had a good size market share in China for traditional lease financing. We thought they were a great qualified partner for us. And then we hit this kind of roadblock which is every lease financing company was requiring a much larger deposit for EV than it was typically for combustion engine vehicles. And the fleet operators didn't have that extra. Their business model just was built around the status quo. So bringing these liquidity pools together gives us not only the ability to bridge that gap in financing but also to do 100% financing where it is appropriate.

--------------------------------------------------------------------------------

David Joseph, - Private Investor [27]

--------------------------------------------------------------------------------

Very good. And core strengths, what do you think is -- what is the core strength of Ideanomics at this present time? Obviously you guys are building in -- now you are focused on two sectors, but what would you say is the core strengths of the Company?

--------------------------------------------------------------------------------

Alfred Poor, Ideanomics, Inc. - CEO [28]

--------------------------------------------------------------------------------

Right now I would say that, without wanting to get kind of too braggadocious, I don't believe there is another company out there with the IP capability of us of what it takes to enable EV, EV en masse for the commercial market. Because we are involved right from the supply chain side through to the financing side and ABS refinancing. And with our manufacturer battery partners, everything, rebate partners at government level, we are involved in every aspect of it.

So I think we have as a bit of a brain trust right now a really good understanding of how to do EV enablement at scale. And I think it will take some time for others to catch up with us.

--------------------------------------------------------------------------------

David Joseph, - Private Investor [29]

--------------------------------------------------------------------------------

I hear you. So for example, if I am Mr. fleet operator in China and I have 100 vehicles and I need to convert them into -- I need to electrify them all. I would come to your hub and you guys would take care of everything for me. Is that the way it works right from financing [concerns, insurance] --

--------------------------------------------------------------------------------

Alfred Poor, Ideanomics, Inc. - CEO [30]

--------------------------------------------------------------------------------

Yes, absolutely. I mean, we were aware that a number of cities were looking to establish themselves as an EV hub, so we spoke to many of them. We partner with the city of Qingdao because it's a port city. It is across the water from Japan and Korea so it attracts a lot of business from those countries and their auto manufacturers. So that seemed to be a very strategic hub for us.

But the hub will showcase the best of obviously our financial services to help people get the vehicles purchased, but also from all of our manufacturing and battery partners. But over and above that, we will have insurance services on-site and we will also have vehicle registration services on-site. So the equivalent of the local DMV will be on-site in Qingdao so we can take care of every aspect of whatever the commercial vehicle partners' needs are.

And we are developing that hub into something of an expo. So if you are a fleet operator, you can come to Qingdao, you can see the very best of what is available to the market, and kind of do a one-stop shop and be catered to for whatever your needs are.

--------------------------------------------------------------------------------

Operator [31]

--------------------------------------------------------------------------------

David Lulloff, private investor.

--------------------------------------------------------------------------------

David Lulloff, - Private Investor [32]

--------------------------------------------------------------------------------

I was just wondering, but MEG's revenues will eventually start to come in and perhaps have an exponential effect. When do you see their revenues as really starting to come in greatly: second or third quarter or fourth quarter?

--------------------------------------------------------------------------------

Alfred Poor, Ideanomics, Inc. - CEO [33]

--------------------------------------------------------------------------------

We don't know what the full impact of coronavirus will be. It looks like it is tapering off very quickly because of the measures taken within China. We are starting to see similar measures here if you have followed the news in the last 24 to 72 hours.

We have managed to get some revenues. We haven't finished the quarter yet, so I can't speak to that entirely, but there are revenues in Q1. We will see it lift in Q2; to what extent will be dependent on a full lifting of the interstate transportation. At the moment, to move from province to province, which is like moving from state to state in the US, there is still a lot of restrictions and you can't get deliveries done while those restrictions are in place. So the faster those restrictions lift, the better. But we are anticipating as life is returning to normal in China for Q2 to record revenues as well.

--------------------------------------------------------------------------------

David Lulloff, - Private Investor [34]

--------------------------------------------------------------------------------

All right. And how about Fintech Village. Any update on that or what's the future for that?

--------------------------------------------------------------------------------

Alfred Poor, Ideanomics, Inc. - CEO [35]

--------------------------------------------------------------------------------

Fintech Village, we are taking a long hard look at that. It has been a much longer, slower grind through the approvals process with everyone from the Department of Environment and the Environmental Protection Agency, because of the contamination in the building, through to weapons commissions and others, because it's got protective weapons on the property. So we are looking at the moment to bring some partners in to help reinvigorate some life in there while we put more of our time and attention into MEG at this point.

--------------------------------------------------------------------------------

Operator [36]

--------------------------------------------------------------------------------

Tim Moynihan, Janney.

--------------------------------------------------------------------------------

Tim Moynihan, Janney Montgomery Scott - Analyst [37]

--------------------------------------------------------------------------------

Can you just give us an update on the -- I'm probably not saying it right -- the MEG mall? And is it -- I'm kind of confused. Is that you are purchasing an old mall and revamping it or it's a brand-new structure? What's the status with that?

--------------------------------------------------------------------------------

Alfred Poor, Ideanomics, Inc. - CEO [38]

--------------------------------------------------------------------------------

Okay, so this is being provided by the city of Qingdao. It's an existing facility. Several of us were out there. It was already being refurbished to be an EV hub and they were looking to try and attract partners into it. MEG was the one that went in there.

The building is mostly finished. It has obviously been slowed down because of the coronavirus. But the idea of it is it's about 1 million square feet of space. The idea there will be there will be vehicles on the site, similar to what you would see in a very high-end showroom. There will be multiple manufacturers from across the EV industry. It will be a friendly competitive environment.

There will also be the administrative offices for MEG centrally for all of its processing for everything from invoicing through to rebates and accounting systems, things like that, will be based there for MEG. It is rent-free, so the city of Qingdao has made that rent-free to us. They have also made an investment into us, as you probably are aware from the press releases.

But it is a very exciting project for us. For us, it doesn't matter if the building is new or old. It is being completely refurbished so the insides of it are going to be as new. It is all going to be glass-fronted and showroom kind of style in terms of the vehicle displays. So for us, it is an incredible opportunity.

We have synced up really well with what the city of Qingdao and the province is looking to achieve. And they have been prepared to put their money where their mouth is with investments as well. So we are still in negotiations for other lines of investment with them as well as part of expanding that relationship.

--------------------------------------------------------------------------------

Tim Moynihan, Janney Montgomery Scott - Analyst [39]

--------------------------------------------------------------------------------

You said rent-free and no expense to get in as well?

--------------------------------------------------------------------------------

Alfred Poor, Ideanomics, Inc. - CEO [40]

--------------------------------------------------------------------------------

Absolutely. Rent-free, no expense to get in. The rent-free is for an initial period of 10 years. But it won't allow us -- somebody had asked this recently with inquiry to investor relations. They won't allow us to charge rent to the EV partners because obviously they don't want to provide a building rent-free to us and us sublease it out at profit. So all participating partners subleasing from us will be rent-free as well. There's some tax breaks that go a long with that.

They are also folding in the existing activity at the site. At the moment, the site is used for a number of purposes, but a large portion of it currently already has a vehicle sales site. So they are going to be folding that in and contributing that part of the business to the subsidiary of MEG that they invested into.

--------------------------------------------------------------------------------

Operator [41]

--------------------------------------------------------------------------------

Thank you. We have reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.

--------------------------------------------------------------------------------

Alfred Poor, Ideanomics, Inc. - CEO [42]

--------------------------------------------------------------------------------

No, just on behalf of Tony, Conor, and the rest of the Ideanomics --

--------------------------------------------------------------------------------

Tony Sklar, Ideanomics, Inc. - VP, Communications and IR [43]

--------------------------------------------------------------------------------

Oh, sorry about that. I was -- sorry, I was on mute. Thank you very much. Thank you, Kevin, very much, operator. I appreciate that. This is all the time that we have for today and this concludes the Ideanomics fourth-quarter 2019 investors conference call. We encourage our community to continue to reach out to us as well as any questions that we didn't end up getting answered for you. Please do not hesitate to send them in to ir@ideanomics.com.

We'd like to thank our listeners, shareholders, analysts, and others who have taken the time to listen to this earnings call. We urge you to refer to our latest SEC filings for any information that you need. This call will be available on our website in the investor relations section. You can find the link there.

To be alerted of our news, events, and other information in a timely manner, we recommend you following us on all the social channels, sign up for our newsletter, and explore our website at www.ideanomics.com. Thank you, everyone, for participating and listening on this call today.

--------------------------------------------------------------------------------

Operator [44]

--------------------------------------------------------------------------------

Thank you. That does conclude our teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.