Q4 2020 Boxlight Corp Earnings Call
Your program will begin in approximately two minutes.
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The Star Zero.
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Thank you and welcome to the box like fourth quarter and full year 'twenty 'twenty earnings conference call by now everyone should have access to the press release issued this afternoon.
This call is being webcast and is available for replay. The remarks. Today will include statements that are considered forward looking within the meaning of securities laws, including forward looking statements about future results of operations business strategies and plans customer relationships Mark.
Trends and potential growth opportunities. In addition management may make additional forward looking statements in response to your questions.
Forward looking statements are based on management's current knowledge and expectations.
As of today and are subject to certain risks and uncertainties and may cause the actual results to differ materially from the forward looking statements a detailed discussion of such risks and uncertainties are contained in the company's most recent most recent form 10-K form 10-Q and other repair reports filed.
With the SEC the company undertakes no obligation to update any forward looking statements on this call management will refer to non G. E. P of Buzz yours that when used in combination with.
G. A a P results provide additional analytical tools to understand the company's operations. The company has provided reconciliations to the most directly comparable G. A a P financial measures in the earnings press release, which will be posted on the Investor Relations section of the company's website and investors.
Dot bauxite dotcom.
And with that I will hand, the call over to bauxite, Chairman and executive Chief Officer, Michael Pope.
Good afternoon, everyone and thank you for joining our fourth quarter and full year 2020 earnings call.
Despite the COVID-19 pandemic that his cost challenge and disruption to traditional communication of both education and business settings, we closed the fourth quarter with record customer orders and outperformed our revenue and earnings guidance.
For the quarter, we reported customer orders up $33 million revenue was up $32 million and adjusted EBITDA a positive $400000. We also ended the year with $11 billion of back orders the strongest pipeline in our history for both the U S N of media and a healthy balance sheet, including $13 billion on cash.
Cash $21 million on working capital and $45 million in stockholders equity.
We're seeing an increased demand for our solutions. This year and we expect to report the first quarter of 2021 with revenue greater than $28 million and positive adjusted EBITDA, Although we will not be providing guidance at this time for the whole year 2021 note that the first quarter is seasonally slow and has historically accounted for less than two.
The percentage of our annual sales.
We are benefiting from a robust and growing market for interactive hardware and software solutions with increased spending in both the education and corporate sectors.
Vacation systems in particular are accessing large budget allocations for technology supported by substantial government funding as the outfit classrooms with solutions for virtual hybrid and traditional learning.
As a company, we see a unique opportunity to take advantage of this expanding market and capture additional market share by optimizing our sales channel and promoting our best in class solutions and exceptional customer support.
In September of 'twenty, 'twenty, we acquired Sahara presentation systems, our most significant acquisition to date with a purchase price of approximately $74 million I'm happy to report that the integration has been overwhelmingly seamless and we are reaping the benefit of our global scale additional seasoned leadership expanded product suite combined sales Chan.
Oh and dramatically improved financial position.
The five member executive team today includes three executives from the Sahara transaction, namely marched Archie as President and head of global sales, absolutely as Chief Financial Officer, and Sean Mark Lewis Chief Technology Officer, you will hear from both Mark and Pat during our remarks today.
Although we are headquartered in Atlanta, Georgia, We are a global company with nearly 200 employees of which approximately 100, our position throughout Europe in countries, including the United Kingdom, Germany, Holland, and Sweden, Finland in Belgium.
Were also supported by thousands of representatives globally through our distributors and reseller partners, which promote our range of solutions to the education corporate and government verticals. We have sold of our award winning clever touch menu on bauxite granted the many of the largest organizations and education systems the worldwide.
Earlier this week, we announced the acquisition of cover of our club Retouch distributor in Belgium, and Luxembourg, extending our footprint in Europe. This transaction as part of the broader strategy to both improve our profit margins and maintain stronger relationships with our reseller channel and the end users.
We have closed 10 acquisition to the company since 2016 and will continue to be acquisitive with a focus on geographic expansion. However, our primary focus as a company is to take advantage of the current market conditions and our unique offering to drive strong organic growth with that I will now turn the call over to our president Mark Starkey.
To provide additional color on our sales efforts for the quarter.
Yeah.
Thank you, Michael and I'm, calling in today Tonight from a very dark London, So hello, everyone. It's the.
Italy is an exciting time in our industry and I would like to reiterate your point about how smoothed the integration of the Sahara business into the books has been it literally could not have gone on any of that Oh, it always sort of liked to take this opportunity to thank all of our staff and customers who have helped contribute to our success in.
Q4.
During the fourth quarter, we booked over $33 million in orders from our partners that represents a 453% gross the order intake year on year.
Some of our key orders included $4 $2 million from the NIH in the U S. Two point of $8 million from trucks in the U S $2.8 million from our partner in Denmark unit D. K 1.6 million thought of as my partner in Australia.
1.3 millions of dollars of orders from the polymer in France speech, a $1.2 million of orders from kidney in the U S.
170 K.
From a partner in Spain Xiaomi ex.
And $668000 from one of our partners from the U S audio Nash the highlight just a few.
It is worth noting the in some countries such as Australia, Denmark, Spain, and France, we have of single distributor of running the territory, but the other key markets such as the U S U K and Germany, where you run on one channel with many resellers.
We have over 1000 of actually partners globally, including approximately 500 in the U K over 300 in the U S on over 70 in Germany.
During Q4 part of future source of consulting we retained the number one market share position the interactive flat panels I F. P D.
Yeah.
And Denmark.
Overall, our Q4 of market share in EMEA was $6 six per cent of the <unk>.
P D market, just behind the Samsung who had 7.7% market share.
The RFP the market in EMEA is currently worth $1.26 billion per annum the.
U S market for high of P. D. CS margin you think other than EMEA at 1.2 dollars 7 billion all of us and our Q4 market share was $6 one per cent.
This represents a significant growth in market share for book slate and our ambition is to be the top three spots in EMEA.
And the U S in the very near future with our ultimate goal to take the number one spot.
To put that into context, we would need to have approximately 15% market share of ISP DS in the market currently worth approximately $2 $5 billion in order to take the top three spots.
In addition to IP days, we are also growing in other product categories, including software.
As a SaaS based maybe the connect platform.
Professional services and accessories, all of which have high gross expectations and deliver high margins.
The total Ed Tech market is well in excess of several hundred billion dollars and there was huge room for us to grow within the small kit.
Outside the U S and EMEA, our Latin American business is growing through key partners in Puerto Rico, Colombia, Peru, and Costa Rica.
In Australia, we have grown from almost nowhere to become the number one brand and I think the east over the past 18 months.
In Asia, we are developing opportunities with partners in Singapore, Vietnam, Thailand, and Indonesia.
Predominantly in the private school sector.
In Africa, we have a strong partnership with the distributor in South Africa called interactive value based solutions, who is actively selling our solutions across Namibia Botswana.
Nigeria and Ethiopia.
In terms of end users, we have literally hundreds of fantastic wins across the globe from Australia, Australia and Europe.
From the UAE in the middle East of the USA and from Sweden to Russia.
One notable win was at Shelby County in Kentucky, the cash.
The soul of the value in a clever share southwest week, the clever message solutions, which differentiate us from the competition.
We also had another great win Sunday on ice tea in North West, Texas the.
District States that the real on the reliability and ease of use along with the clever message the clever share of key factors in choosing a clever solution.
In Germany, our revenue in Q4 grew at 195% year on year and we won many orders a couple of standout in particular of project with our partner Bechtel.
The supply of your ex price solution to the German army.
We also on another project in Germany, with our partner video total Stein the supply out solutions into the German government.
In EMEA approximately 14% of our Q4 revenues were sold to non K 12, and uses such as health care government and corporate organizations in sectors, such as financial services manufacturing and retail.
Typically our corporate revenues would be at least 20% of total total revenue in EMEA, but this sector has been widely impacted by Covid during 2020 compared with the education sector.
The reason this is so important.
You said the gross margin of cheap on a corporate sales is much higher achieving 45 per cent on average in Q4.
Given the at the high margins achieved in corporate and the fact, the we believe the non K 12 opportunity is significant we have decided to launch the dedicated sales team in the U S with the sole focus of developing these market opportunities.
This team will be led by Dan team SVP of corporate sales in the U S.
Price of Dan joining us in September of last year. He spent three years of senior director of visual system sales of Panasonic.
We look forward to sharing the progress of this team in the future as the.
So let me start to reopen and the solutions we.
So ideally suited to work with the likes of zoom teams and Cisco Webex begin to gain traction in the U S market.
Our strategic partnership with Samsung has continued to progress over the last several months.
We have developed many of connect software so that it can be deployed directly on samsung's ties in the operating system on we expect the old Samsung RFP dis in the education market.
Chip with the many of the connect companion apps from the summer.
We have also developed a go to market plan with Samsung So that both sales teams have the ability to sell the solution into the channel.
This has not been a quick task is changing the go to market sales processes within Samsung of $200 billion company. He's complex on its taken a huge amount of assets over the past six months.
However, I am pleased to announce the systems have now been put in place and we expect significant revenue to start flowing in Q2, this year and readiness for the main education season.
We look forward to discussing the ongoing relationship with Samsung and progress over the coming months.
Finally, I would like to reference the significant amount of emergency funds are being made available for education as a result of COVID-19.
In the U S. The 2.2 trillion dollar cash act provided $37 billion for education the.
The 900 billion dollar of Covid Relief Act signed into law in December provided a further $82 billion of.
The 1.9 trillion the American rescue plan signed into law of this month provided $168 billion.
In total we estimate there is approximately $3000 every schoolchild in public education in the U S.
So like of $70000 available per classroom.
All of the solutions the back book slight shelves in the U S are eligible for these funds.
Actively working with school districts to ensure that the phones are correctly spent.
It should also be noted the book Slide is the only top five O F. P. D supplier in the U S, which is not directly owned by a foreign entity.
The other full providers on either Chinese or Taiwanese owned and we are starting to educate our partners and end users on the importance of security and data sovereignty.
In summary, Q4 was the very strong quarter in terms of order intake and revenue and we continue to develop our key partnerships and alliances across the globe.
I like to hand back to Michael.
Thank you Mark in addition to the significant investment in our global sales organization. We are also completely committed the product innovation and are proud of the vast awards and accolades. We've received in recent months for our various solutions, including our line of the interactive flat panel displays menu of connect blended learning software platform mice them kits.
Virtual stem curriculum, we'll go three D printing solution and professional development content for extending learning beyond the classroom among others.
This month, we announced the Grand opening of our virtual classroom in Atlanta, Georgia, which is fully staffed and available for live virtual demonstration of our full solution suite. We also opened our collaborators gallery located in Central London, where the.
The key demonstration space, a boardroom unified communication total space and in formal meeting area per partners and colleagues.
The last November we appointed Dr. Don Graham and heart as director of strategic funding of the grants of box like to provide an additional resource. The K 12 school districts in need of support to access various education grants as well as the nearly 200 billion in federal funds available. The K 12 education from the cares Act Corona virus.
Response in the release supplemental Appropriations Act and American rescue plan.
The Doctor Graham on heart plays a key role in helping education leaders and administrators understand the requirements under the various programs and match solutions needed to solve the existing problems and challenges such as returning to the classroom safely and bridging the student learning GAAP.
With that I will now turn the call over to our CFO Patrick falling.
Yeah.
Thanks, Michael and good day.
Good evening to everyone.
This is all sorts of phone calls from when we on reporting the combined results of the Bulks likes on Sahara.
So further expand the more you've already heard from Michael of Marc I would like to out of few figures to provide context of bulks likes international operations.
From a revenue of one country and region perspective on central revenue in Q4 was $31 $9 million of which EMEA represented 64%. The U S 30 per cent the rest of the world, 6%, which was mainly Australia.
In terms of the customers the top 10 customers represents approximately 54% of total sales in Q4.
With the single largest customer of just under 10% of.
These are used across the number of markets, namely the U S, Denmark from Australia, Finland, Spain, Belgium, and the U K.
Nearly two thirds of total sales of covered by the top 20 customers.
In relation to sales product mix on gross margin.
In Q4 displays remained the largest proportion of total revenues of 73%.
These were largely on the S. P D sales familiarity and clean the touch screen.
With the related accessories generating from the 14th 2%.
The Sahara they can see distribution business was approximately 10% on the balance coming from software services and Stan.
Adjusted gross margin for the quarter was $26 four per cent.
The RFP the margin was approximately 27%, which would've been slightly higher however, the chiefs of increase going to shipping costs martucci spine two to three percentage points.
Well what are we seeing a slight reduction in global freight and shipping costs. It still remains high the normal and will impact the next two quarters.
In relation to the screen sizes, we have seen in recent years the trends of the larger format displays and in Q4 'twenty. There's continued within the education sector of 75 per cent of autonomy and.
In spite of tons of IPD sales with 75 inch and 86 inch panels.
I will now review of fourth quarter and full year 2020 results.
Our financial results for the three months ended December 31, 2020 were as follows.
Revenues for the three months ended December 31 was $31 $9 million compared to the $5.9 million for the three months ended December 31 2019.
The resulting in the 437% increase due primarily to the acquisition of Sahara in September of 'twenty 'twenty.
Gross profit from the three months ended December 31, 2020 was $3 $6 million as compared to $1 million for the three months ended December 31 of 2019.
Gross profit margin for the three months ended December 31, 2020, with 11, 2% compared to $17 six sent from the three months ended December 31 2019.
Resulting in the decrease of 64 basis points.
The change of profit was mainly due to the Sahara purchase accounting adjustments, which resulted in a decrease of gross profit of $4 $8 million.
However, the taking this into consideration the normalized gross profit range for the three months ended December 31, 2020 was eight point for millions of dollars or $26 four per cent.
This was slightly down year on year, principally due to the increases in global shipping costs, which impacted margins somewhere between two to three percentage points.
Total operating expenses from the three months ended December 31, 2020 were $11 $1 million compared to $42 million. Unfortunately for the $2 million for the three months ended December 31 2019.
The increase resulted from additional overhead costs associated with the acquired from our operations in September of 'twenty 'twenty.
Other income expense from the three months ended December 31, 2020, net expense of $1 $9 billion.
Compared to net other income of 0.2 million for the three months ended December 31 2019.
The increase in other expense was due to zero point $7 million of increased interest expense associated with the increased borrowings.
The point of $8 million of losses recognized from the settlement of certain.
Since the strange the common shares and zero point $7 million on.
The gains that were recognized in 2019 on the remeasurement of sentence derivative liabilities.
The company reported the net loss of $8 six millions of dollars for the three months ended of December 2020, as compared to 2.9 millions of dollars for the three months ended December 31 2019.
The net loss attributable to common shareholders was $8 $9 million.
$2 $9 million for the three months ended December 31, 2020 of 19, respectively.
After deducting six dividends the series B preferred channel.
Comprehensive loss was $3 $3 million and $2 $8 million for the three months ended December 31, 2000 2019.
Reflecting the fact of the cumulative foreign currency translation adjustments of <unk>.
$5 $3 million and zero point of $1 million because of the three months ended December 31, 2020 on 19, respectively.
The resulting EPS loss of the three months ended December 31, 2020 was <unk> 17 cents loss per diluted share.
Compared to 26 cents loss per diluted share from the three months ended December 31 2019.
Adjusted EBITDA for the three months ended December 31, 2020 was income of zero point for millions of dollars.
That's compared to a loss of $2 $6 million of the three months ended December 31 2019.
Adjustments to EBITDA include stock based compensation expense.
<unk> losses for the Remeasurement of the derivative liabilities.
The restructuring costs acquisition costs and the effects of the purchase accounting adjustments in connection with the Sahara acquisition.
Adjusted EPS of the three months ended December 31, 2020 was one cents per diluted share compared with 24 cents loss per diluted share for the three months ended December 31 2019.
Okay.
At December 31, 2020 book slides had $13 $5 million from cash and cash equivalents of.
$21 million in working capital of $144 million in total assets of <unk>.
$24 6 million.
The minions all of the debt $44 9 million in stockholders' equity.
$53 3 million common shares issued and outstanding and $2 9 million preferred shares issued and outstanding.
<unk>.
The financial results of the year ended December 31 2020.
Revenue school that year ended December 31, 2020 on.
$4 $9 million compared to $33 million per the year ended December 31, 2019 of 66% increase.
The increase in revenues was largely the result of the acquisition of Sahara in 2020.
Gross profit for the year ended December 31, 'twenty 'twenty.
With $9 $9 million.
<unk> to $8 $9 million for the year end of December 31, 2019, the 10% increase.
The gross margin decrease from 27, 1% to 18% was driven by the effects of certain Sahara purchase accounting adjustments of $5 $1 million.
The resulting normalized gross profit rates of the year ended December 31, 2020 was 27, 2%.
Compared to 27, 3% of 2019, showing slight decrease due to the increased global shipping costs.
Total operating expenses for the year ended December 31 2020.
When you went to $2 $6 million compared to $17 million from the year ended December 31 2019.
The increase relates to additional overhead cost of the acquired Sahara operations.
And other income and expense for the year ended December 31, 2020 was the net expense of $4 $3 million.
As compared to a net expense of $1 $3 million for the.
The year ended December 31, 2019.
The increase in other non operating expenses, primarily due to $1 million of additional interest from the increased borrowings.
$1 $5 million increase in losses incurred from the settlement of certain nukes.
And zero point of $4 million of increased expense, resulting from the fair value remeasurement of the derivative liabilities.
The reported net losses of $16 $2 million and $9 $4 million for the year ended December 31, 2020, and 19, respectively.
The net loss increased by $6 $8 million.
However, this includes $6 6 million GAAP expenses.
Items related to the Sahara acquisition one.
One $6 million amortization of intangibles.
$4 2 million of fair market value of inventory purchase accounting adjustments and 0.8 million fair market value of deferred revenue adjustments.
Net loss attributable to the common shareholders was $16 $5 million and $9 $4 million of the yearend December 31, 2020, and 19, respectively.
After deducting the fixed dividend the series B preferred shareholders.
The comprehensive loss was $10 9 million and $9 $3 million for the year ended December 31, 2020 and 19.
Flipping the effect of cumulative foreign currency translation adjustments of $5 $2 million.
Zero point of $1 million for the year ended December 31, 2020, and 19, respectively.
The resulting EPS loss of the year ended December 31, 2020 was 39 cents per ton.
He could share compared to an 88 cents loss per diluted share for the year ended December 31 of 2019.
Adjusted EBITDA loss for the year ended December 31, 'twenty 'twenty.
It was $1 million, an improvement of $4 $7 million compared to $5 7 million dollar most of the year ended December 31 2019.
Adjustments to EBITDA include stock based compensation expense gains and losses from the re measurements of the derivative liabilities restructuring costs acquisition costs and the effects of purchase accounting adjustments in connection with the Sahara acquisition.
The adjusted EPS for the year ended December 31, 2020, with two cents loss per diluted share compared to 53 cents loss per diluted share for the year ended December 31 2019.
And with that we'll open up the call for questions.
At this time, if you would like to ask a question. Please press the star and the one on your Touchtone phone.
Again that Istar and wanted to ask a question.
We will pause for a moment to a lot of questions to queue.
Yeah.
And we will take our first question from Jack Vander Ark with Maxim Group go ahead. Your line is open.
Hello. This is Allen Klee for Jack first question is on the Samsung partnership you've talked about how that's kind of.
It looks it looks like that's kind of ramp up could you give us a sense of of how it was in the fourth quarter and how are you.
How do you think about kind of what the whole of what the revenue opportunity is in 'twenty, one and longer term.
Yeah do you want me to say so Michael.
Yeah, how about you start and I can fill in if needed.
Sure so in terms of Q4.
We've had a we still do you still have very few number of sales with Samsung, but really the vast majority of the time, we've had to rework. The go to market plan. So that both of our sales team and the sales team has the ability to take this the market and that really has been quite complex.
In terms of figuring out how the channel cash.
And by the Samsung solution, including our software, which is embedded on that.
On that product so.
On the minimum numbers out of the moment. So our expectation is from Q2, we should be ready to really hit the market properly and both sales teams will be able to sell it easily.
Thank you and then for your just announced the acquisition of interactive concepts.
I think in the press release, it said six and a half million of revenue last year of positive earnings.
How should we think about how that can impact it like the benefit you get from owning that and and the contribution that that might have.
Yes, the only a couple of thoughts on that so that's the first one is the the purpose of the acquisition as we mentioned in the press release and also in our remarks of day was number one to improve our profit margins. So of course us owning the distributor and selling direct to the resale of partners, we pick up additional margin and that's a major focus for us as the company is to improve on.
Our gross profit margins, but then secondarily, it's to maintain stronger relationships with our reseller channel in that territory, which is going to help us grow sales and in and in the the territory.
With that being said, we also mentioned in the press release that we were seeing tremendous growth in that Benelux region 25 per cent year on year growth I think it can grow quite faster than that and and its a significant area of Europe. The if you look at that Benelux region, it's about 6% of the total European population. So it's it's it's important to of strategically so as far as kind of what it could mean.
For US is again higher gross profit margins, but then also with greater sales growth you know, we're gonna generate of course more of our bottom line ultimately.
Thank you and in regards to mimeo clarity.
You mentioned, how this is kind of get coordinated into Samsung.
But overall can you give us a sense of of what this can mean for revenues in 'twenty. One and also I think last quarter. You said you sold about 300 units and can you share of like how many units were sold in four Q.
Yes, so with many of the clarity for those that aren't familiar that's our audio solution and we don't have a partnership with Samsung per se on many of clarity and we can bundle all of our menu of clarity solution with Samsung, but the focus with Samsung is on two things. It's our Nino connect software platform. So that's our SaaS based education platform and then also the professional development.
Services that we're offering including the on like self paced learning modules that we're bundling with the Samsung solutions as far as mimeo Aw clarity, though our audio solution. We are actually starting to see significant sales of that solution. We have a couple of large contracts that we've won and we're installing those solutions now we haven't broken out the sales at this point in time.
Of what that is but I think that's something we can do Allen for our next earnings call. After the next quarter, but I would tell you the the opportunity within the clarity is a is as big as it's ever been and we are indeed selling on.
Large number of those units and delivering a large number of those units.
I would add to that Michael I'd say that would be called make them quick enough as watch se Reis se.
You know, we need to get it but it makes them far more quickly because of the significant the moms.
Yes.
That's great and then one last question then I'll get back on the queue for a couple of others I'll ask later.
Yeah.
Just in terms of kind of your.
Your your mix of some of your end markets.
Thank you previously mentioned that's of Harris revenues was 15% corporate <unk> 85 per cent of education I was kind of wondering if if you think that mix is going to change and also you talked about how you're trying to you you have the stem and software of which are higher margin.
First of all how can you just talk about if you think like the mix of the of these.
The things might change in 'twenty one.
How do you want it.
Yeah, it's kind of like either.
The last kind of where we ended up for the quarter. So al Yankee of that and then I can feeling about how I think it's going to trend.
Yeah. So in terms of the Sahara I'm kind of revenues for Q4, the pro as we call. It the clubs the pro market. So that we sort of as he was about 15% on the Cooper markets of the total life PD sounds the went out as claim of touch products and then the balance of education. So it was quite significant pulse Oh.
All of that time is a very lucrative in terms of our margin.
Yeah, and I would add to that we've talked about future source out who who puts out.
Some research that we follow on if you look at the future shorts reports they actually show for 2021 they expect the corporate market of all Isps would be about 25 per cent in EMEA and about 16% of total liabilities in the U S. So you know if if we're looking at the future. We added at a minimum we out of trend closer to those numbers about.
16% of our total sales on the U S 25 per cent in EMEA and I think that we could perhaps start to even exceed those numbers because we're putting more focus on it and you heard Mark talk about the reason for that focus and it's number one theres a massive me theres not theres not a lot of great providers that are providing interactive flat panels with all of the other solutions you need to be successful on those.
Environment, but secondarily, they're there's a entire markets and because of the higher margins that makes it even more attractive.
That's great. Congratulations thank you I'll get back in queue.
Thank you and the ones.
Once again, if you would like to ask a question that of Star and one on your Touchtone phone you may remove yourself from the queue by pressing the pound key.
At this time, we will take our next question from Brian Ken Stinger with Alliance Global your line.
Great. Thanks can you hear me.
Yeah, we can hear you Brian.
Great Great Hi can.
Can you.
You mentioned the market share gains the clever touch you need this year.
Can you talk about what you think is driving those gains how clever touch is differentiated if at all and then with the merger with box like how you can even further differentiate that product to gain more share.
Yeah, So Brian I'll I'll speak a little bit and then mark feel free to jump in if he'd like so so the first off as far as differentiation. We we have the most comprehensive solution suite on the market for education. We also have a quite comprehensive sweep of corporate and government but for the.
The first speaking of education. Our solution suite includes of course interactive flat panels that we've talked about but beyond that we sell software we sell accessories, we of stem solutions wherever our professional services team, where we provide training professional development and it really is that brought a unique offering that makes us more competitive and if you start with with any one of those solutions. We also.
We have a superior product than most of our competitors out there. So we're just competing on interactive flat panels. We believe that we have a superior interactive flat panel. The most of our competitors and we can be competitive on price as well, but when you tack on the software and accessories and the services piece. We think we can win out most of the time when we compete in the <unk>.
Yes.
Great and then.
Mentioned, the cares act and other funds that are being made made available of the schools for a variety of reasons in the U S.
Our or all of the or are most of the school system. The you talk too aware of the sponge or do they need to be educated and that's where that the of channel partners come in and I guess I'm curious are they coming to you knowing they have access to or do you have to educate them.
Yeah. So we don't have to educate them on on the phone as everybody knows about the funds and the funds generally are allocated by state and then by the states down to the school districts, but the school districts don't just get the funds typically there has to be some type of application process to access the funds and so the answer is yes. They know about the funds of course they do.
But in some cases, they don't quite understand how to access the funds and if they if even if they know how to access the funds. They may or may not have the resources of wherewithal to prepare the documentation to request of funds and that's where we hired a in house grant writer, who who helps with that and we're marketing that person. We also if you go to our website and look at email campaign.
So we do we talk about helping educators access. These relief funds and then we can provide provide a lot of that help but what it comes down to is in some cases per <unk>.
Pairing the grant paperwork or the request documentation to axis of funds it could be quite a long document and theres a lot of that goes into it and we do have resources, including this grant writer. They can help the school districts are be able to apply and receive the funds.
Great and a few more of the first of all you mentioned, which I think was bullish the first quarter of normally less than 20 per cent of revenue but.
But when I take the combination of your two companies, but then I add the Samsung opportunity.
Which you know may be meaningful to as well as some other catalysts.
It seems you, possibly the that it may be even.
Even a.
Less of a percentage than it typically is this year or is it too soon to tell.
Yes, it's probably too soon to tell because there's a few things that are going into play you know one of the Samsung of course as that ramps of course that that would make a difference on how soon these federal funds entered the market that that could play into it also buying habits have shifted a little bit of course with Covid and you know initially there are a lot of the buying.
But shifted to address the initial needs and now they're they're flexing back the other way to address.
Traditional classroom needs. So I think it's tough to tell but our best estimate is it's roughly what we provided in our guidance, you'll remember was 28 million.
For Q1, right and then typically Q1 is less than 20 per cent. So you can get an idea of how we're trending for the year based on those numbers.
And with all of the pieces such as Samsung stay on the services around it.
I guess I wanted to ask about the gross margin if I look at the adjusted $26 four per cent, notwithstanding freight costs coming down and we pushed out of aside.
Do you and in the past you expected to gain you know.
A little bit of margin throughout the course of the year or do you still feel that way at the $26 four per cent and just kind of take us through you know with the mix and how that might change a little bit.
Yes, we still feel like we can improve that keep in mind. The 26, 4% was not including the adjustment of two to three points on freight cost or I'd say, if you take the $26 four plus two to three points, that's getting the closer to that 30 number in the past we talked about we ought to be 25 day 30, and we ought to be on the high end of that approach.
The <unk> 30, I think this is going to be that year, where we can start to demonstrate additional improvement in gross profit margin and we definitely out of push that 30% margin number.
But looking into future years, we've always said and this is still the case that we know we need to be higher than that and that's going to happen as we improve our product mix.
As we've talked about including selling more of our higher margin accessories, and other professional services and our our of software solutions, which are of high margin.
How we're going to get there, we're not going to get there by keeping the same product mix, we have today, which is.
Predominantly interactive flat panels.
Lastly on the acquisition you made this week of interactive concepts and.
Is there a pipeline.
Of similar channel partners or distributors, sorry that you're evaluating in in various geographies.
Geographies in Europe, given you know wanting to be closer to the customer and the reseller.
The answer's, yes, yeah. There there are several others. We're looking at so we'll have to see how that plays out over time, but our model is ideally in most cases as exceptions of this but in most cases, our model is that we want to be closer to the resale of partners into the end users, where we can again have those higher margins are by by cutting out that distributor but.
Then also where we kind of a lot more influence and we think of as having more influence the asking the result on the higher sales growth versus just relying only on the distributor and keep in mind the distributors Hell of lot of other solutions behind the besides of our solutions and so where we're competing sometimes to be able to get market share from the distributor of their business and sort of generally yeah, theres going to the others. We're looking at all.
Others, and we hope to announce the additional opportunities in future quarters.
I guess, we're treating me on one more question of that Alan was trying to ask you did see this.
The company that's the.
Distributor did the $6 $4 million in revenue how much revenue did you generate through that distributor and I guess I'm curious how much you did versus you know kind of on the other technologies out there.
Yeah, we we Didnt report that number but to give you an idea of about half of their business came through clever touch about the other half came through other distribution. So you can run some numbers on that and and in addition to their revenues of the $6. Five so you can run the numbers on the $6 five.
They were quite profitable. So I think we said profitable, but but they they were they were quite profitable and that's going to hit our bottom line.
Great. Thanks, so much.
Yeah. Thanks, Brian.
And we will take our last question from Jack Vander Ark I believe that is Allen in for Jack. Please go ahead. Your line is open.
Yes, Hi, I have two quick questions. The first one.
Remind us. So you said you did 33 million of customer orders.
Remind us how you define that if that means future orders and if so over what time period do you think you you.
The close on them.
And I'm asking that related to.
How do you think about the impact of what's going on with container ships and and things like that and how you feel about your levels of inventory I think you entered the year to year of around $21 million.
Hum.
So so is that do you think debt, where you might have of a challenge of enough inventory or do you have ways of working around that.
That's a great question Alan the answer is there there is the there has been a little bit of a challenge to manage the supply chain because of the challenges with shipping and and shortages of certain components and things. We've managed it okay and we don't believe there'll be an impact of our numbers. So.
So as far as the inventory levels are healthy we're in a good place of inventory the question around customer orders at $33 million. Yeah. That's orders, we actually received during the quarter, but we didn't ship right. That's what that means and then of course, we had of 30 million of 32 million of sales for the quarter. So that 32 million net sales of the those are debt that's.
Of course, the solutions that we delivered of ships.
As far as of 33 million excuse me as far as we ended the quarter with back orders I believe it was on mute.
A lot of a million, okay, the 11 million backwards because of it.
Out of 11 million of what would be shipped in Q1, I mean, we recognize that 11 million in Q1, there would be minimal if any debt was not recognized in Q1, and so as far as how how how long do they carry over what's going to be less of the quarter in almost every case.
So just the words to that point, Michael just on King I was pointed out the supply chain on the challenges obviously the.
Every business is seeing globally in some of the supply chain.
So one of the things we have done the obviously, we have a strong balance sheet and through Q4, we knew this was coming up as a.
The supply chain challenge for the business globally. So we've seen actually a pretty sort of building so actually cancel those challenges and readiness I'm.
So have the stock available to sell and we have and we do the same things from Q1 on fluids. So that's one of the new always looking.
Looking out on the planning horizon instead of the law.
Supply chain of three six months at least the head in terms of what's needed in terms of the moment Bunny.
Great and then one other thing I think Brian touched on this I'll try to ask it a little different of.
Just of the seasonality and the the different quarters and you've mentioned one Q is your seasonally slowest, but I took a look over the last five years and if you looked at for Qs revenue as compared to <unk> revenues. The Theres really no consistent patterns of it's up some years some.
So so it seems to me that like it's a pretty equal chance on it that it could be up sequentially.
Sequentially or so I'm just wondering why why that's not the case based on your best judgment to that.
Yes.
Yeah, Let me say a couple of thoughts let me say a couple of asking you to step in so if you look at box of historical we were much more of a business and as the smaller business. One large order right could swing the quarter pretty substantially and so if youre looking at again quarters from 18 19, and then first part of 'twenty, we do.
It did have some large orders and you would see swings in those quarters now that we're a much larger business in the concentration of one order one partner is much smaller you're gonna see more normalized approach to evaluating the quarters and you're not going to see that see that same variability, but you're right I mean potentially there could be a large number of orders or in.
In our case now would be have to be several significant contracts that would be the swing of corner of quarter abnormally.
But I think we feel pretty good about that 20% guidance for Q1, we gotta be around that number if you're looking out of the future for Q1.
Okay. Thank you some of them.
Very briefly Tonight, just in terms of the seasonality and as.
The global business don't forget the northern Southern Hemisphere as some of the periods of the difference from the holiday schedules for schools.
Buying patents by the time, you just changed the whole net result, but also within Europe.
Buying patterns and ordering patterns in terms of a you know a play.
Placing their orders on on I'll show, you that actually comes into play.
To help smooth that but actually it does create a different trends what you would've seen historically on the books on tickets.
That's very helpful. Thank you.
Great. Thanks, Alan I appreciate it.
And it appears we have no further questions at this time I will now turn the program back over to Michael Pope.
Thank you everyone for your support and joining us today on our fourth quarter and full year 2020 conference call. We look forward to speaking to you again in May when we report our first quarter 2021 results.
Yeah.
This does conclude today's program. Thank you for your participation you may disconnect at any time.
Okay.
Yes.
Yeah.
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Okay.