Q2 2020 Vislink Technologies Inc Earnings Call
[music].
I'd like to remind everybody of the safe Harbor statement reference in the FCC filings.
Private Securities Litigation Reform Act of 1995 provides.
Harbor for certain forward looking statements.
Putting statements made during the course of today, it's cool.
They must contained herein that are not based on current or historical facts or forward looking in nature and constitute forward looking statements within the meaning of section 27 day of the Securities Act of 1933 and section 21 E of the Securities and Exchange Act of 1934.
Such forward looking statements reflect the company's expectations about future operating results performance and opportunities that involve substantial risks and uncertainties.
When used here in the word anticipate believe estimate upcoming plan target intend and expects and similar expressions does it relate to this link technologies, it's subsidiary or its management are intended to identify such forward looking statement.
These forward looking statements are based on information currently available to the company and are subject to a number of risks uncertainties and other factors that could cause the company's actual results performance prospects and opportunities to differ materially from those expressed in or implied by these forward looking statement.
For more detailed discussion of some of the ongoing risks and some uncertainties of the company's business. Please refer to the company's various filings with the Securities and Exchange Commission.
Thank you the window Hello, everyone. Thank you bill or feel there's like technologies I want to walking you through the visibly juju 2020 earnings but what.
I'll be joined on this webcast with Mike bond or CFO, we'd like to take this opportunity report on the progress we made in the second quarter 2020, and provide you an update our latest developments in future prospects.
That's we'll be able to submit questions. During the webcast from the main webcast page and we try to take his main we cannot the yen.
As many of you know we began it'll many of the operational turnaround the company in January of this year. We're happy to report that we have completed the first phase as it turned around and accomplish the phone.
Reconstituted the board of directors all the board members with the exception to two Swanson, our chairman who led the transition in general James Conway.
Less than 15 month the tenure.
All the board members, excluding the our independent.
We revamped the senior leadership team all leaders with the exception the Belinda.
Our head of HR or either new to the company we're promoting from within.
Rightsized the business to align with our targeted growth markets, we focused our efforts in four key areas like production military government satellite and managed services. These are all large markets, which represent significant growth opportunities for products and services.
We re energizer Satcon business with new leadership, a new product roadmap and sales training for our global sales see Reprioritize research and development to bringing innovation to our new product pipeline relief aid product modifications to meet market requirements of product shipments.
Finally, we improved our supply chain to increase our efficiency and liquidity.
We worked very closely with our supply chain partners to pay down trade debt, which was extensive.
Earlier, this year and moved to market based terms.
Everyone is aware of the difficult conditions that worldwide businesses had been subjected to over the last several months.
The effects was colder 19 pandemic.
Well this link hasn't been immune disease conditions I'm pleased to report that we were able to increase our revenue and approve our margins over the prior quarter make your operations more efficient and putting the company out of course to achieve profitability.
This is all more impressive when you consider that the company achieved this.
Despite the challenges of managed in a global supply chain during cold 19. The fact that we were able to make ongoing improvements into production operations of the business is a testament to the hard work of all our visiting employees.
I continue to be impressed by the commitment sacrifice and team effort effort that they have displayed in the face the challenges.
These successful efforts allowed us to substantially increase our liquidity and we reported a cash balance of over 5 million at quarter's end.
No long term debt.
I will now I'll turn it over to Mike Bond, who will walk us through our financials.
Thank you Mickey and good morning, everyone.
I'd like to give you a few financial highlights from the second quarter.
Revenues for three months ended June Thirtyth, 20 26 million.
Which was an increase of 11% over the first quarter is 5.4 million revenue.
This compares with 7.4 million for the three months ended June 32019.
Gross margins were 59.6% of revenue in Q2 compared to 47% in the first quarter of 2020 and 52.1% in the second quarter of 29 tea.
Net loss attributable to common shareholders narrowed substantially in the second quarter up 2020, $778000 or five cents per share compared to a net loss of 4.4 million or nine cents per share in the first quarter of 2020, and a net loss of three point Sixmillion.
Or 10.7.
Dollars per share in the second quarter of 29 feet.
Net loss attributable to common shareholders was 5.2 million or 45 cents per share for the six months ended June 30, 2020 compared to a net loss of 6.7 million for $20.44 per share for the six months ended June 30 29 G.
EBIT da which is earnings before interest taxes, depreciation and amortization was a negative 421000 for the three months ended June 30 2020.
This represented an improvement of 3.5 million over the negative 3.9 million for the three months ended March 30, Onest 2020 by comparison EBIT da was a negative 1.9 million for the three months ended June 32019.
As Vicki mentioned, we ended the second quarter of 2020 was 5.1 million you'd cash.
Which is up from 2.5 million at the end of the first quarter 2020.
Now I'd like to give you just doesn't.
Sample of some of that business highlights business outlook, if I could.
As we look forward to phase two of our turnaround we are optimistic that the difficult steps, we've taken have given a significant positive momentum.
This was reflected in the solid financial results, we recorded in Q2, despite a very adverse business climate.
The company is now in a better positioned to reach our growth and profitability objectives than it ever has been.
Well, we are pleased with the results of our actions from the first phase of the turnaround we recognize there remains a large opportunity for improvement.
During the second phase of our turnaround R. Maczka will continue to be one of fiscal discipline with a focus on managing costs and conserving cash.
As we now embark on phase two of our operational turnaround we have a number of exciting plans, we're putting in place that we believe we'll make an important contribution to our future success. These include the following.
We will continue.
Our efforts to streamline and lower costs and improve the responsiveness of our supply chain to reduce our quote to cash interval.
We have kicked off a companywide integrated business planning process initiative, which will improve our cash.
Efficiency and customer satisfaction.
With our market focused sales team, we will introduce innovative approaches to solve our customers' problems. Most recently, we implemented our trade in trade up sales campaign, where we reached out to over 9000 strong customers 9000 strong customer base to give them the opportunity to trade in previous generally.
Ration does link product for competitive product for the latest generation.
Of our new products.
Since the inception of the program two and a half weeks ago, we have generated over 5 million in opportunities.
Our research and development group is geared up to introduced several new products in the coming months.
We are working with our lead customers in close cooperation to create leading edge differentiated solutions.
We're also going to rationalize our product portfolio, which will allow us to streamline our processes and make the optimal use for human and financial resources.
In our service business, we see a tremendous opportunity to grow in support of over 100 million and deployed product in the U.S. alone.
During Q3 will be integrating our service platform into our sales platform. So that all service solutions can be sold through our sales team.
We will also increase engagement with our live production customer base and incentivize them to play an integral part.
In the development of our future product roadmap and we will enhance our mil Gov OEM bar in integrator relationships to elevate or market identity.
An increase visibility for our projects.
We are also identifying increasing opportunities for remote observance and communications business with from the military and first responders as they shift their priorities.
We will continue to underpin the company with financial and operational stability needed to allow us to attain our goals of sustainable and profitable growth.
A key part of this is reduced judicious use of cash to that in the strong cash position, we are and gives us the flexibility to explore potential opportunities for inorganic growth.
We are currently reviewing this will complete complement sorry. This will complement the organic growth we expected in our traditional business sectors now I'd like to hand, it back to Mickey for at market outlook.
Thanks, Mike looking at the market for the balance of 2020.
Broadcast live production market, we expect to see continued headwinds our live event wireless camera segment with far fewer live sporting events.
The spend by broadcasters and service providers has been reduced significantly. We are however seen increased quoting activity in our motor sport product offering as many of the racing series of successfully returned to racing.
Also we are seeing increase quote activity with broadcasters needs to upgrade their microwave links.
The Mil Gov market, we're pleased with the focus activities of the team led by Jim The gallon, who joined US in March we've increased our level of sales focus on Oems as sales partners to broaden our market reach we did see level. Several large orders shipped from Q2 key Q3 given.
Uncertainty related to covert 19.
Our second business, we are starting to see results from an increased focus investment from earlier this year, our current sales funnel as an excessive 70 million with several multi year deals.
And then finally, our services business, while our services business is comparatively small we see tremendous opportunity here and have lined our resources for success, we expect to see significant growth in this area in particular extended warranty preventative maintenance and commissioning insight into this utilization.
In summary, and why we continue to work through the market challenges of rely production business as a result of coal over 19, we're optimistic about the growth in other areas. Our business. We have now focused as part of our turnaround strategy.
So now we'd like to answer some of the questions that have been submitted during the webcast.
The first one is from Brent Van Dyke, Brett as how do you think the pandemic has affected the recent quarter. When you look back in April May and June you know for us and I think for many people it not in our industry, but in many industries.
Many customers were either.
Shutdown or or and quarantine state.
Many work from home. So we saw it kind of a hunker down mode. So a lot of activity that was happening either halted or shifted.
We started to see activity.
In June of when people started getting back.
Many wouldn't look at their budgets and say well, we need to pushes out into Q3, others move forward. So we're able to.
Secure and when the backlog that we had an add to that.
However, it was certainly any quarter for us and for many industries.
As we as we.
Left the June quarter, we did see some interesting things happening for us the life production side. The business is in a challenging situation as you know a there are limited live sports and live sports activity is happening is without spectators.
So the amount of technology, that's needed to do that as a subset of what it was traditionally we expect that to come back once the pandemic is complete.
But we remain focused that we can only focus on.
What we can control and we see opportunities in the broadcast area. Both in our motor sports area as well is in our point to point microwave links business, what our point to point, Mike really microwave links do is connect the infrastructure of the broadcasters as you can imagine news a news gathering.
It is a growing opportunity and for the industry, there's growth there and so they've been able to upgrade some of their networks with our product and you see that continuing.
For the balance of the year.
Our Mil Gov.
With social unrest occurring we did see of a lot of opportunity.
On the services side in support of our customers as well as.
We did see some new opportunities arise and we expect to see some closure of those in the third quarter.
Oh satellites are sat com business again follow the same pattern as the other businesses will slow lives and slow slowness in April may and the pick up in the June June month around activity. We do see continued activity, we see that for us for us to be a good growth business going into next year is.
Well.
And then as I mentioned on our service side, it's a small business for us we're putting the wood behind the arrow there, but we see tremendous opportunity we have over 150 million of our own equipment.
Deployed in the networks of our customers we have over 9000 customers.
And we have an opportunity to serve them in support them as they look at their budgets and they may decide to to keep equipment, but we can.
Upgrade that equipment and service that equipment. So they can get extended life equipment. So I think you know in summary.
The initial part of the pandemic.
It was difficult for all of us being in the central business. Our first priority was the safety of our employees.
We were able to maintain operations throughout the entire quarter.
Both our our at three of our locations or three operating locations.
Our supply chain remained intact. So I'm really proud of our operations teams in the work that they did to keep our people safe to remain safe and to produce the outcome that we had in Q2.
We've got one from.
Boy is I knew what big PR for to Q, Yeah, I get a lot of emails everyday about what's PR, what's the PR in our focus this past quarter was number one to keep our employee safe and to to operate during cogan.
Three to.
Turnaround continue with phase one of our turnaround of this business, which we were successful in doing so it's got to like a.
Building a race car you want to focus on the engine for so we focused on the engine and Thats building a cash efficiency engine that can produce growth and produce cash on a consistent basis.
Well there will be a time.
In phase three where we focus on the wheels and the pain color the race car.
But right now we're very focused on building a very strong business. That's consistently returning returns to our investors.
So with that we will you know for for some deals, but but again to get some PR out it requires a lot of work of our sales team to work with our customers.
To get the right quotes and get the right approvals through the customers and right now we want to have our sales teams focused on purchase orders not less not necessarily chasing PR or recognize that you know the market does like a press releases and we will review our share, but but I'll. Let you know we're very focused on.
Generating a business that consistently meets our commitments to you our investors and deploy your capital efficiently and effectively as we can.
Mike you want to grab one.
<unk>.
Sure Mickey and I think there's been a lot of generic questions about what's phase two what does that bring to the company now that we've sort of showing the financial discipline to get the the bottom line back in order, what's next and I think as Mick you touched on we have obviously challenges with a pandemic.
But what we're seeing is customers are not canceling orders were pushing out you know elongating their orders.
And I think you know what we want to do is try to return the company to profitability to grow topline growth sustainable growth.
Marshall the cash that we have on the balance sheet to make select investments to make sure that we're increasing our R&D increasing our product development efforts are producing the products into services that our customers really want as Mickey had touched on there is a.
A whole new hosting ways that with it the broadcast market is starting to look at events. So if people aren't there they're starting to create a richer experience for the people that are at home or accessing that event remotely. So we think we play a big part in that as the increasing coverage of those particular events happens, we hope that visible in shares in that and an increase.
This is our equipment coverage of those events as well.
Yeah. It looks like we have a question quest from Charles will Lynskey, there's linked positioned to benefit from increased defense spending in European countries that have been recently announce for example, Hungary in Slovenia.
Got abuse, the beauty of a visitor because we're a global company, we have sales channels and salespeople globally focused on NATO.
Defense.
Uh huh.
But.
Just the defense countries, the NATO countries and we do see opportunities for growth. There we have invested in that area and we think we'll see opportunities.
I'll start to occur both on our downlink from L. downlink from helicopters airplanes drones, etcetera, as well as our sat com business, but clearly for us. It's it's a business, we really like a business, we see tremendous opportunity. If you think of RF communication between troops.
It's a massive opportunity.
25 billion dollar opportunity and we see a visiting playing a major role in that.
And that's one of the key areas that we see for growth and were excellent position because we do have a lot of legacy product.
That is the news over the years and.
People like to look to evolve from that product not to rip it out and put in new products. So got a great opportunity both on Mil Gov and in.
Our.
Government business local and state government business.
Mickey I saw that question from GE concerning overlapping branch related to visit Lincoln.
We are now taking steps to clarify that we're going to be trading under the brand of Biz link going forward.
And so that hopefully will take some of the confusion out of the market and create a single.
Name brand for the company.
Yeah. We also have another question is.
[laughter] how has over the top affected our business well over the top is is a tailwind for us without coated with covance challenging as you know many of both the pre recorded as well as live events are reduced so while we see that as a longer term tailwind in the meantime, Dan.
Coated.
The headwinds related to the limitations of live events has impacted the growth that we we would've expected to see at this point in time, but certainly as there's more players the apples Amazon's.
On Netflix as well as that Attritional broadcasters, there's more need for content is more need to live production and those are all great for our business in normal times.
I'm just I'm just going through the list here and trying to consolidate lot of the questions are consistent.
Yeah.
Yeah, what marketing strategies in place to increase revenue in growth and what can be done to include increased client base first of all we think you know I'm big believer, it's easier to get orders from existing clients.
The new clients a we've we've had an intense focus on our harvesting over 9000 customer base that we've had.
Over the years that we haven't done.
Very good job of approaching so we've we're beginning to implement some outreach programs to update them on our product offering update them on how we can help them to do their business more efficiently and effectively and so far we've got the excellent responses.
We've engaged with customers that hadn't heard from us and awhile and we're seeing opportunities there as I said in our trading trade up program, where we reached out to over 9000 customers within two weeks, we had over $5 million a new quotes.
And we're seeing that increase every day that was just our initial outreach program and we have quite a few lined up beyond that so we see opportunities with a with the legacy. These business has been around for 50 years. So the brands, whether it's the visiting brand or our sat com.
Side, you know they know our advent brand. They know these brands a tough trustees brand and they look for direction from our brand. So we have great opportunity to reengage with customers, we hadn't engages in a while who respect our brand and then from there we have opportunities and grow we obviously do.
Grow beyond our brand and our current customer base I think that's what we'll start to see towards the end of phase two.
Mickey I see a lot of questions regarding our share price where does the people think we will go into future and I think no. We don't Mickey and I don't sit around worrying about that as much as some people might think what we think is that if we take care of our business. If we show good financial discipline.
The extended in the past, we paid off significant amounts of our trade debt reduced all of our debt on the balance sheet Weve.
Maybe the company much healthier financially.
And if we continue to take the the cash that we we generate and invested in the proper places and grow the business. We think the share price will take care of itself, but right now we're very focused on good financial discipline and taking the rewards of that and investing in the right places in order to grow the business appropriately.
Yeah. Good point, Mike you know Warren Buffett says in the short term stock market as a voting machine in the long term it away machine. We're working on the way we're working on creating a strong capability to provide consistent earnings potential earnings and earnings potential. So that's where our focus is.
One question from landfills, what plans do you have to capitalize on growth and body can't popularity and then what we do providing connectivity for troops is about connecting everything we'll see a world of body cams.
Planes.
Drones.
Helicopters, all being all being connected and that's that's where we where he said the body Cam business has itself is kind of a.
Commodity business the opportunity is around that is the connectivity and the software to be able to take that create actionable directives for people on the ground and people.
In the theater of operations, So that's where our focus is to be part of that so we just see being in the connectivity business of connecting all these elements and wrapping software out it is a good place to be.
Yeah, well timed for one last question.
What do you see the company Years' time, having Mike and I came to this company. We've both been at a variety of small medium size and very large companies.
We see a big opportunity here, who we want to build listen to a large company.
Both inorganically and organically and a very disciplined operational company.
As we said, where we can consistently deliver for our investors.
We view.
Our role.
As a as shepherds of your capital and capital allocation is our number one priority. So when we invest and when we allocate capital you'll be in areas that we see that we can get the returns that you require as an investor and that will be our mantra that will be our commitment to you and we're acutely focused on dry.
I mean returns.
And we're going to do that through operational excellence through sales excellence through a developing innovative and disruptive products for our customers and identifying ways. How we can improve our customers operations that weather helped them increase revenue or help them reduce costs.
And it's a it's a process we're in the early stages. The process. We've got a lot of work to do we've had good progress since we've been here the January but we have a lot more work to do we appreciate the support of all our visiting shareholders.
There are in this for the long run we're here to turn this company around which we're seeing the early signs of and grow EBITDA.
To to reward our investors. So we look forward to that and we thank everyone for your support.
It was that we'll we'll sign often.
Look forward to update you on our Q3 progress.
Thanks, everyone. Thank you everybody.
[laughter].
[noise].