Future FinTech Group Inc. (NASDAQ:FTFT) is a holding company that has transformed its business from fruit juice manufacturing and distribution to financial technology-related service businesses. The company's main operations now include supply chain financing services and trading in China, asset management business in Hong Kong, and cross-border money transfer service in the UK. The company has also expanded into brokerage and investment banking services in Hong Kong.

Business Overview

In the past few years, Future FinTech has undergone a significant business transformation. Historically, the company was engaged in the production and sale of fruit juice concentrates, fruit beverages, and related products in China. However, due to drastically increased production costs and tightened environmental laws in China, the company decided to shift its focus to financial technology-related service businesses.

The company's current business segments include supply chain financing services and trading, asset management services, and other operations. In the supply chain financing and trading segment, Future FinTech provides financing services and trading of bulk commodities such as coal, aluminum ingots, sand, and steel. The company uses its own funds as the operation basis and actively utilizes various financing channels, such as banks, commercial factoring companies, and asset-backed securities, to obtain sufficient funds for its operations.

In the asset management segment, the company's subsidiary, Nice Talent Asset Management Limited (NTAM), provides professional investment advisory and asset management services to its clients. NTAM is licensed by the Hong Kong Securities and Futures Commission to carry out regulated activities in "Advising on Securities" and "Asset Management". As of March 31, 2023, NTAM had approximately $359 million in assets under management.

The company's other operations include brokerage and investment banking services through its subsidiary, FTFT International Securities and Futures Limited, which was acquired in November 2023. FTFT International Securities and Futures Limited holds Type 1 "Securities Trading", Type 2 "Futures Contract Trading", and Type 4 "Securities Consulting" financial licenses issued by the Hong Kong Securities and Futures Commission.

In addition to its financial services businesses, Future FinTech also operates a cross-border money transfer service through its subsidiary, FTFT Finance UK Limited (formerly known as Khyber Money Exchange Ltd.), which was acquired in September 2022. FTFT Finance UK Limited is regulated by the UK Financial Conduct Authority and provides money transfer services to customers worldwide.

Financials

The company's financial performance has been mixed in recent years. For the fiscal year ended December 31, 2023, Future FinTech reported annual revenue of $34.87 million, a decrease from $38.92 million in the previous year. The company's annual net income was -$34.04 million, compared to -$29.78 million in the prior year. The company's annual operating cash flow was -$16.65 million, and its annual free cash flow was -$17.46 million.

In the first quarter of 2024, the company's revenue increased by 52.27% to $5.12 million, compared to $3.36 million in the same period of the previous year. The increase was primarily driven by higher revenue from the asset management service segment, which grew by 38.25% to $4.37 million. The supply chain financing and trading segment also saw a significant increase of 298.71% in revenue, reaching $0.44 million.

Gross profit for the first quarter of 2024 increased to $1.95 million, up from $1.20 million in the same period of 2023. The overall gross margin improved to 38.1% from 35.7% in the prior-year quarter, mainly due to the higher profitability of the asset management business.

However, the company's operating expenses increased by 20.3% to $4.48 million in the first quarter of 2024, primarily due to higher general and administrative expenses, selling expenses, and bad debt provisions. As a result, the company reported a net loss from continuing operations of $3.97 million in the first quarter of 2024, compared to a net loss of $2.14 million in the same period of the previous year.

Liquidity

The company's liquidity position remains a concern, as it had cash and restricted cash of $14.89 million as of March 31, 2024, down from $19.03 million at the end of 2023. The decrease in cash was mainly due to an increase in other receivables during the first quarter of 2024. The company's working capital was $36.78 million as of March 31, 2024, a slight increase from $36.76 million as of the same date in the previous year.

Risks and Challenges

Future FinTech faces several risks and challenges, including the ongoing impact of the COVID-19 pandemic on its operations, regulatory changes in China and Hong Kong, and the highly competitive nature of the financial services industry. The company's previous e-commerce platform, Chain Cloud Mall, has generated minimal revenue and business since 2021 due to the negative impact of the pandemic, and the company has started the process to close it down.

Outlook

Despite these challenges, the company's diversification into financial services and brokerage businesses could provide new growth opportunities. The acquisition of FTFT International Securities and Futures Limited in Hong Kong and the expansion of its cross-border money transfer service through FTFT Finance UK Limited are strategic moves that could help the company capitalize on the growing demand for financial services in Asia and Europe.

Conclusion

However, the company's financial performance and liquidity position remain areas of concern, and investors should closely monitor the company's ability to execute its new business strategy and improve its financial metrics. Overall, Future FinTech's transformation into a diversified financial services provider is a bold move, but the company will need to navigate the challenges of the industry and strengthen its financial position to achieve long-term success.