Keo Capital AB (publ) (KEOC) Earnings Call Transcript & Summary

[Audio Gap] just a quick recap here on our geographies and footprint, we are located and which product is enabling which region. On WorKEO side, our supply chain [indiscernible] product. We are live in Mexico. We just launched [indiscernible] like i just told in the previous slide, and we expect to launch Brazil in the next -- in this quarter of 2026. On the Cross-border Solutions side, we are already live in the United States, Peru, Chile, Columbia and Brazil to benefit on these cross-market transactions of imports. Moving to the next slide. Here, we bring more about customer evolution. So just a reminder that the closing occurred during the month of April, in the beginning of the second quarter when the business combination took effect. During the beginning of the year, we have been focusing on developing our products, technology and creating the foundations for our sustainable growth, aligned with our strategy. So during the second quarter, our average customers grew 60% quarter-over-quarter, and we ended June with 61 active customers. Our focus today is on keep optimizing [indiscernible] for our new clients and also so we can ramp up our products to be more efficient. Moving to the next slide and talking more about the average outstanding portfolio. So during the second quarter, we saw a recurring cycle effect early in the quarter. So as the clients were renewing their product lines, which you recall during the months of May and June. And looking at the end of the quarter position in June, our total portfolio was $50.7 million as the average was around $45 million. Moving to the next page, talking about our total payment volume, the TPV. The total payments volume is the amount of the customer base is transacting during the period and paying their invoices inside our platforms using our products. So our total payment volume kept growing quarter-over-quarter, reaching $51.4 million during the second quarter, a 92% increase quarter-over-quarter and close to 40% growth year-over-year compared to Q2 last year. These aligns for customer base growth rate in the gains that we are expanding our businesses. And during 2026, we reached a total TPV volume of $94.5 million. And if you look at the last 12 months basis, reached almost $200 million in volumes. Keep in mind that the business combination closed as of second quarter of this year, or in April. So this triggers via [indiscernible] and post-closing periods. And moving to the next slide, the total portfolio revenue. So let's talk about revenue and then take rates in CPI that we are showing this stage. Revenue basically comprises all the income streams for instance, the interest rates, interchange fees by deductive payments to the networks of the [indiscernible] companies and also other fees. And the take rate is basically the amount of this revenue divided by the amount of the payment volume, so the TPV during the same period. We're presenting out total average income over the amount of transactions occurred by our customers during the period. So basically, the take rate is the portion of each transaction that stays [indiscernible]. During the second quarter of 2026, represented $1.6 million in revenue with an average take rate of 3.1% on the TPV volume. During the first half of the year, the total pro forma revenue reached $3 million in the last 12 months, around $5 million. Remember, these numbers are basically considering a pre-transaction Keo balance sheet and post-transaction Q2 the former company. Our near-term focus right now is also launching new programs to also provide support of revenue expansion going forward. So by launching [indiscernible] in Brazil we expect to see this effect in the upcoming quarters. So with that, I will hand you now to Davide Tomassoni to walk through the Venezuela slide on [indiscernible] energy. Dave?

Thank you so much for having me today. So I think the most important points here, we need to discuss that we completed the purchase of 24% from [indiscernible]. And then we are purchasing price of 16% or about USD 37.5 million which would take us to about 40% equity of PU PetroUrdaneta. We have a contingent payment of $18 million with an enforcement of first option call from now. August 28 to sign a major contract, which is an operational agreement, with defined the OG commercializations, which define the marketing, sales, commercialization, gas productions. And also, we have a great news because we were able to add the associated gas to this new contract, which before it was not included. In terms of a new negotiation, we were able to include an income tax, 34% of greenfield versus the 50%, and we have an extension of JV to 2056. So we are negotiating also an extra $9.9 million of equity, which will take our stakes up to 49.9%. This is an ongoing conversation with PDVSA. And I give it back to you guys. To Roberto and Miles.

Thank you, Davide. Before we get to the numbers, let me explain a little bit how they were built. The figures on the next few slides, pro forma figures consolidating Keo World on a pre-acquisition basis with the prior Maha Capital figures plus the results of the combined entity post-acquisition. These pro forma numbers are not reflected in Keo's official financial statements that presented just for illustrative purposes to explain the trends and business performance irrespective of the capital transaction that took place in April. So picking up the top -- on the top on revenue as we covered in the fintech section. Revenue came in at $1.597 million, which was up 12% quarter-over-quarter and 16% year-over-year, and this was driven by higher [indiscernible] volume and growth in the portfolio. On the operating expense side, which are the direct expenses related to managing the portfolio, we came in at $2.549 million, which is up 60% quarter-over-quarter, and that reflects the post-acquisition ramp-up of our operations across several geographies as well as higher payment volume. We go to the next slide. Moving to general and administrative expenses. Recurring G&A in the second quarter was $2.177 million, while total G&A was $4.5 million. The difference between the two of $2.323 million is nonrecurring expenses, which is mainly due to the relisting and acquisition costs as well as the Venezuela transaction. On the financial income, we came in at $1.594 million, and this is primarily the net interest income from the investment of our cash in the balance sheet. And that quarter 4 amount, it reflects the investment of the -- or I'm sorry, quarter 1 amount, the $2.85 million was the interest income from the old Maha prior to the deal. The next slide is a year-to-date progression review, while our accumulated net loss for the year so far was $48.9 million, a significant portion of that $45.358 million is noncash and that was due to stock-based compensation expense, co-investor share issuance and other noncash impacts. Obviously, these consume account profit that don't represent an actual cash outflow. If we remove those noncash items and also remove the nonrecurring G&A that we showed on the previous slide, which was $3.54 million, we reach a breakeven level year-to-date of just over -- just over breakeven of $5,000. I want to be explicit that this adjusted figure is not a GAAP measure. This is distinct from our statutory year-to-date net result of the $48.901 million. Turning to cash flow. We started the period with $117.7 million in cash plus credits. Operating cash flow was negative $17.7 million, which was driven primarily by working capital changes the net operating results as well as interest expense and FX. Investing cash flow was positive $9.4 million, including $9.1 million of cash generated from the business combination and financing cash flow was positive $14.1 million, largely due to a capital raise priced at SEK 16 per share as part of the deal -- the transaction that closed in April. We closed the period with $123.5 million in cash, credits and restricted cash and a net cash position of $108.5 million after the co-investor loan, which includes the $50.7 million of customer receivables portfolio that Roberto showed earlier. With that, I'll hand it back to Roberto for some closing remarks.

Thank you, Miles. So going to closing remarks. So basically, on the left side of the page, we have here our achievements of the first half of the year. On the Fintech side, we completed the re-leasing process. We completed the capital raise of $28 million at SEK 16 per share. We closed the business combination with KEO World. We also closed the facility of CAD 15 million to support Canada growth, and we also launched WorKEO in Canada. On the Energy side, we exercised the first call option of PetroUrdaneta then we reach the binding agreement to increase our stake to 40% at the JV level and also the final agreement with [indiscernible] just signed in the last couple of days with the [indiscernible]. What's about the next steps on the Fintech business. As we mentioned, we are about to launch Brazil WorKEO platform, hopefully this month. On the Energy side, we expect to sign the offtake agreements with [indiscernible], issued a reserve report in this next month, and that these additional gas reserves that [indiscernible] was mentioning and second, an update of the reserve reports. On the corporate side, we continue working with the spin-off and also the U.S. listing. Again, once we are now with American leadership, we want to also be a fully American company and on the Fintech side after we conclude the spinoff of Energy side, we also intend to list the [indiscernible] business in the United States. So with [indiscernible] our presentation and open the room for Q&A session.

Well, thank you for that, gentlemen. There have been a lot of questions ahead of this presentation. And as we speak, the viewers are sending in their questions. And as I said, I would try to keep questions slightly put together with Keo Capital and Energy and then perhaps a P&L question. So I will start with, let's say, a P&L question, so I will read one viewer here. The Swedish Krone 16 races were struck at a premium to the current price with a $4 million per quarter underlying burn and the $27.5 million Venezuela step up due around on November close, what's the expected cash position at year-end? And should shareholders expect further raises before the Fintech turns cash generative. So basically, it's a question of raising capital here before year-end.

So we will not give guidance by the position of year-end, but the idea is once we are explaining the initiative on Venezuela, which took for the best [indiscernible] when it comes to finding the resources for the payment stone [indiscernible] by the end of the year. And also remember that in the oil field side, Davide can talk more also but we do expect a huge amount of capital [indiscernible] in the first month. So we will have more time for the best solution, I don't know, Davide, if you want to complement?

Yes, definitely as Roberto said so. So I think I'm [indiscernible] with you on this.

Well, thank you for that. And then if we look at your outstanding portfolio, it declined slightly, I would say, but it did decline from $1 million -- $49.8 million in the first quarter to $45.6 million. So the main question, I think, from the writer here is, has your expansion halted? Or how should we view this? Well, this temporary setback?

That's a good question. Thank you, Karl. And that's why we included a new KPI for the investors to better understand the cycles we have inside, this right? Because the right way of looking at this is also supporting the KPIs of your active customers and also your TPV volumes trend because we have these other businesses, the cycle. So normally, your clients can pay their credits by the end of the month. So by then, you will experience this reduced amount under the outstanding credit portfolio. But if you look at it compared to the other KPIs we are going to understand the trend now as we are working hard here on establishing technology, the foundation, the procedures. But also working on the relation to customers, and we see this growth trend here for the next quarters.

Thank you for that. And we continue here with Keo Capital then. How much of the CAD 50 million in the credit facility has been drawn to date?

We just launched Canada. We are starting building relationships with customers. We are building the team organization. So everything is being set for the next quarters to come. So as of now, we are working to establish everything to start growing. And remember that in this facility, we withdraw 80% in advance to each credit line that we provide for customers.

And there's a follow-up question here. Would you give us a -- well, a number which I would assume would be growing, but the number of Canadian customers onboarded and approved for credit?

We have a pipeline in place, we cannot disclose right now, but in the next quarter, we'll be happy to do so. And again, we expect to see activities and growth in the next quarters.

And if we turn our eyes to Brazil, also a viewer question here. How many companies are currently onboarded and approved for the credit and actively trends acting, I should say.

I think Brazil didn't launch yet, right, that we expect to launch Brazil in Q3 this quarter by the end of this month of September, and once we are live, again, we are putting [indiscernible] a team. We are creating a foundation, the technology side and we expect to release more figures by the course of next quarter.

And I will combine two questions here. One is, if you could give us more color of the portfolio and any estimates of the year-end? And I will combine that with a question here that I will translate from Swedish, which is, what kind of portfolio size do you need to get a sustainable breakeven for the Fintech?

No, like I told you on the previous slides, we just launched Canada during Q3. We are about to launch Brazil. These are two important pillars to start growing our strategy across different and huge markets in Latin America and Americas. And we also are working on the cross-border solution parallel. So we see here a lot of potential, but we cannot give guidance by the end of the year. In meantime, I think we already did this [indiscernible], right, using potential numbers, which will reach around $120 million for volume, this will mean revenue generation capacity between $25 million, $30 million, which will provide us to be in a profitable position.

Right. And then we have some questions about Lionheart. So could you elaborate on why you did not renew your exclusivity with Lionheart?

Thank you, Carlos, for the question. So jointly, we're ending the NOI, the binding ally with Lionheart because adding the gas to our commercial agreement, so we're increasing a lot of our valuations. So our valuation prospects were not aligned. So we need to protect our investors. That's the reason why we decide primarily to offer direct leasing at a spin off from the NASDAQ in Sweden.

Thank you for that. And while we're at it with Keo Energy here, you have mentioned the expected reserve report on the second half here. And we'll be able to pinpoint more granular?

So we are doing actually two reserve reports. So the first one is on the crude, which should be out in the next 2, 3 weeks. And then we are adding the reserve report on the gas, which will be out by the end of the year.

And further on the Energy side here, I would just read the question right up. Is it right to assume that the deal signed with PDVSA has derisked Keo Energy in your mind and thus improve the intrinsic value? And I can see why that question is coming. So could you...