Q1 2021 Boxlight Corp Earnings Call
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Yeah.
Thank you and welcome to the box like first quarter 2021 earnings conference call by now everyone should have access to the press release issued this afternoon.
All is being webcast and is available for replay.
Our 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 market 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 form.
K 10 and form 10-Q.
And other reports filed with the SEC. The company undertakes no obligation to update any forward looking statements on this call management will refer to non-GAAP measures that when used in combination with GAAP results provide additional analytical tools to understand the company's operations. The company has provided a reconciliation to the most debt.
The comparable GAAP financial measures in the earnings press release, which will be posted on the Investor Relations section of the company's web site at investors Dark dark box slate dot com and with that I will hand, the call over to Marc Fox White, Chairman and Chief Executive Officer, Michael Pope.
Okay.
Good afternoon, everyone and thank you for joining our first quarter 2021 earnings call.
We completed another record quarter with 48 million, new customer orders 33 million in revenues, 28% gross profit margin as adjusted for acquisition related purchase accounting and one 6 million on adjusted EBITDA again, outperforming our guidance for the quarter.
We also reported as of March 31, 21 billion in back orders, a strong balance sheet with 10 million on cash 23 million in inventory 22 million working capital and 47 million in stockholders equity.
Our triple digit revenue increase over the same quarter last year is a testament to our winning expansion strategy through both organic growth and strategic acquisitions.
We continue to benefit from unprecedented market expansion, particularly in the education sector at schools return to in class learning and are utilizing increased technology budgets supported by substantial government funding programs.
Given our current order volume and growing sales pipeline, we are optimistic on the second quarter and expect to report revenue of $39 million and adjusted EBITDA of more than $1 billion, resulting in an expected first half of 2020, one with $72 million on revenue and greater than $2 $6 million and adjusted EBITDA.
In addition to our remarks today I invite you to reference our shareholder letter published on April 27, which provides a more detailed accounting of our progress to date as well as insights on our growth strategy while.
While receiving record order volume, we have experienced some supply chain challenges, including interruptions to inventory production schedules as a result of component shortages along with delays in the shipping and receiving up good. We've also been managing cost increases for both hardware and shipping which has resulted in reduced gross profit margins.
These are global challenges and are not unique to us. However, we believe we are managing better than most by extending our production planning and where we can increasing prices for our customers as of today. We have scheduled production through the end of 2021 with anticipated lead times of 46 months on certain of hardware solutions.
On March 23rd we acquired interactive concepts, our distributor in Belgium, and Lucky Luxembourg, extending our footprint in Europe. This transaction was part of a broader strategy to both improve our profit margins and maintain strong relationships with our reseller channel and end users in that territory year to date with published 18 customer case studies highlighting.
Successful technology implementations, including in Kansas City schools in Colorado, Shelby County public schools in trade the Paris schools in Kentucky, They're Ridgeway school and the British Academy in the U K and San Augustine Day, Bill Dallas Center for higher studies, and Spain. Among others. These case studies highlight the.
Positive impact that our technology solutions have on learners, including students with special needs. The strong future extend solution integration and classrooms, and the benefits of display technology for <unk>.
Higher education and corporate environments.
We will continue to produce a steady flow of educator and corporate success stories, featuring our breadth of solutions.
In early March we announced both our bauxite virtual classroom in Atlanta, and clever touch gallery in Central London are box by virtual classroom as a fully staffed classroom space used to facilitate customizable live virtual education experiences utilizing our full solution suite. The virtual space is also used to host weekly education.
Focus webinars to help educators understand how our solutions can best be used to optimize learning.
Our collaborators gallery in London showcases our state of the art collaboration touch screens commercial displays digital signage and cutting edge OLED video wall. The gallery features a boardroom unified communication total space in.
Informal meeting areas and hot Desking space for partners and colleagues also on Mars relaunch clever touch Academy and expansive hub of resources Vittorio lesson plans virtual self paced training and detailed downloads designed for educators traders trade partners and engineers.
Earlier this week, we announced our certification is a Google service partner in education with specialization in professional development for the U S Europe, Latin America, Australia, and New Zealand.
During Q1, we had some significant updates to our software platforms, including the latest releases for Vimeo connect and links whiteboard, which is now available on all major app stores, including Google play Samsung Amazon and Apple Cnemial connect has been enhanced with video and audio communication and additional classroom management tools.
Our new clever touch lives platform is an ecosystem, allowing users to deliver on manage digital signage messaging alerts and customizable user interfaces across any network.
Or maybe you touch screens also feature mimeo message, our digital signage platform and maybe a market or education App store.
In addition to the updates to our platforms. We have also developed our next generation of interactive displays with several significant technology updates, making them. The most advanced on the market with anticipation to begin shipping later this year.
As we continue to expand resources for educators companies and partners. We are receiving substantial recognition from the Ed Tech and AEP industries for our innovation. During this year both on Vimeo connect blended learning platform and my stem Kids content earned awards from Tech <unk> Learning magazine for best remote and blended learning tools in the primary and secondary.
School categories. Additionally, our ROE with three D printers in my spend gets curriculum, Andrew on maybe you'll clarity classroom audio system.
Were named as Ed Tech finalist by Ed Tech Digest.
Clever touch was Shortlisted at the innovation awards for best place to work best business growth and best communication and collaboration product for the U S. CRO with winners to be announced next month.
Our school systems identify needs for their teachers and students, making many school systems are looking to government relief funding to purchase resources materials and training.
In the U S to assist school districts with accessing federal funding such as that provided by the cares Act. The coronavirus response, and a release supplemental Appropriations Act and the American Rescue Plan Act, we have developed and promoted support content and services. This includes our newly released relief funding guide and ex.
<unk> of our internal funding team to help decision makers navigate the process of acquiring this critical funding.
I am extremely proud of our progress through Q1 of this year led by our tremendous leadership team and talented hardworking employees. We are committed to our loyal partners and supportive shareholders and we will continue to drive results and realize our mission to be a global leader in providing interactive technologies.
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.
Thank you Michael.
Q1 was certainly a record quarter for us and I would also like to take this opportunity to thank all of our staff and our customers who have helped contribute to our success during the quarter.
As Mike stated earlier, we booked over $47 million of orders from.
For my partners that represents 528% growth in order intake year on year and is a record for folks like <unk>.
Some of our key orders in the U S included $8.7 million from tenet for.
For $2 million from Central technologies, $2 $4 million from our distribution partner D N H two.
$2.2 million from trucks.
$3 $2 million of orders from digital age technologies and $2 million from takes projections.
Whilst many of our largest orders were from U S partners. It is worth noting that we took over $21 million of orders from partners outside of the U S with dominantly in EMEA.
This highlights the quality and diversity of our customer base, which will be crucial as we develop and expand our business over the next few years.
On the 26th of April two of our largest partners Canyon trucks merge to become one organization.
It is a very significant opportunity for bauxite, because tinny county has exclusive price. So clever touch from 49 to 50 states in the U S.
We are discussing the extension of a clever touch exclusivity contract to include trucks across force, United States and Canada.
This means that once an agreement is reached the number of salespeople who are actively selling clever touched on in the U S will increase substantially from about 40 heads to over 200 heads we expect the agreement to be finalized in the next few weeks.
This smart speaker is clever touch true sales presence across the U S on Canada.
In terms of end users, we had another quarter of fantastic wins across the globe.
One notable win was the Ministry of defense in the U K.
M O D purchased more than one point for millions of clever touch screens to use throughout their bases in the U K.
They selected our screens for two main reasons, firstly, the ability to totally locked down on all screens and use them in a very secure environment and secondly, because of the flexibility the link software, allowing the M O J to get the maximum benefit from the clever touch screens.
The Americas region for bauxite had several key wins in Q1 of 2021.
Price in school districts in Michigan purchased more than $1.1 million in bauxite product, including 338, six inch panels and on maybe a clown car audio system for each classroom.
A key reseller in Tennessee Central technologies continues to do well throughout the states purchasing more than $2 $6 million in books like products in Q1, including a major win Warren County.
Okay.
Our strategic partnership with Samsung has continued to progress this year.
We recently received our first substantial order from a minimum connect software from Samsung U S for approximately $1 million for us.
The mall Samsung has agreed every interactive panel that they sell into the U S education customers will automatically include Mimi I connect license.
We are also on discussions with Samsung UK and other parts of EMEA about similar opportunities from EMEA connect solution on Hudson announced further wins shortly.
In addition to the software sales. We are also committed to selling high volumes of Samsung hardware on.
Our partnership agreement, including non interactive displays.
For what to providing additional updates later this year.
In summary, Q1 was a very strong quarter in terms of order intake on revenue and op solutions like getting lots of traction in the market.
We continue to develop our key partnerships and alliances across the globe and I look forward to another record quarter in Q2 with that I will now turn the call over to our CFO Patrick Foley.
Thanks, Mark and good afternoon, everyone.
For further expand on what you've already heard from Michael and Mark I would like to add a few figures to provide some context for bulk flight international operations.
The revenue by country and region.
Revenue in Q1 for $33 4 million.
For me it was 54% for $18 $1 million on which the UK represented 56%.
The U S was 42% for $13 $9 million the rest of the world, 4% $1 4 million, which was mainly Australia and South Africa.
In terms of customer the top 10 customers represented approximately 47% of total sales in Q1.
For the single largest customer at 8%.
In her based across a number of markets, namely U S U K, Denmark and from.
Nearly two thirds of total sales are covered by the top 20 customers.
On the 64% this is pretty similar to our Q4 2020.
From a sales product mix and gross margin in Q1 display remained the largest proportion of total revenues at 78%.
These are largely sales of interactive flat panel displays with related accessories generating 9% on the balance coming from software services and stem solutions.
Adjusted gross margin for the quarter was 25, 6%.
<unk> margin was approximately 26%, which would have been slightly higher.
As reported by Michael earlier increased global shipping costs, where we are seeing a for at normal rates have reduced margin by up to four percentage points.
We anticipate the higher costs will remain for the next two quarters.
Screen sizes.
In Q1, 'twenty country, one within the education sector.
87% of all interactive displays with 75 in on 86 inch panels, which follows the trends we are seeing with larger screen format.
I will now review our first quarter results.
Actual results for the three months ended March 31, 2021 were as follows.
Revenues for the three months ended March 31, 2021 were $33 $4 million as compared to $5 7 million for the three months ended March 31 2020.
Resulting in a 484% increase can be primarily for the acquisition of Sahara in September 2020.
Gross profit for the three months ended March 31, 2021, with $8 $6 million as compared to $1 $6 million for the three months ended March 31 2020.
The gross profit margin for the three months ended March 31 twice for 'twenty, one with 25, 6% on the adjusted net effect of acquisition related purchase accounting margin was 28% as compared to 27, 9% gross margin as adjusted and reported for the three months ended March 31 2020.
Gross margins have been adversely impacted by up to four percentage points due to increased price and customs costs caused by supply chain challenges associated with the effects on the COVID-19 pandemic.
Total operating expenses for the three months ended March 31, 2021 for $10 $6 million as compared to $4 $3 million for the three months ended March 31 2020.
Primarily resulted from additional overhead costs associated with the acquired Sahara operations in September 2020.
Other income expense for the three months ended March 31, 2021, with net expense of $3 1 million as compared to net other income of <unk>.
For a flavor for $7 million for the three months ended March 31 points for 'twenty.
The increase in other expense was <unk> 6 million of increased interest expense associated with increased borrowings one.
One $9 million of losses recognized on the supplement for certain debt obligations that were exchanged for common shares.
Thank you again for recognized on the settlement of accounts payable, which were $1 $1 million lower year on year, and <unk> $3 million of additional losses that were recognized in 2021 upon the re measurement of certain derivative liabilities associated with common stock warrants.
The company reported a net loss of $5 $2 million for the three months ended March 31, 2021, as compared to net loss of $2.0 million for the three months ended March 31, 'twenty two 'twenty.
The net loss attributable to common shareholders was $5 $5 million and $2.0 million for the.
Three months ended March 31, 2021, and 2020, respectively.
After deducting fixed dividend for the series D preferred shareholders.
So this will comprehensive loss was $5 $4 million and $2 1 million for the three months ended March 31, 2021, and 2020, reflecting the cumulative effect of foreign currency translation adjustments on consolidation with.
But the net effect in the quarter on 0.3 millions on the loss and <unk> one millions on the law for the three months ended March 31, 2021, and 2020, respectively.
The EPS loss for the three months ended March 31, 2021 was non thanks loss per basic and diluted share compared to 16 cents loss per basic and diluted cash for the three months ended March 31 2020.
The EBITDA loss for the three months ended March 31, 2021, with $2 $4 million as compared to $1 3 million total loss EBITDA loss for the three months ended March 31 2020.
Adjusted EBITDA for the three months ended March 31, 2021 was $1 $6 million.
As compared to a loss of <unk> $7 million.
For the three months ended March 31 2020.
Adjusted EBITDA includes stock based compensation expense.
And losses recognized upon the settlement for certain debt instruments gains.
Gains and losses from the re measurement of derivative liabilities.
Thanks for purchase accounting adjustments in connection with acquisitions.
At March 31 2021.
Slide 10 million total cash and cash equivalents $21.8 million in working capital.
$39 $7 million in total assets.
$26 million of debt 40.
$47 $4 million in stockholders equity.
$56 8 million common shares issued and outstanding and $3 1 million preferred shares issued and outstanding.
And with that we'll open up the call for questions.
At this time, if you'd like to ask a question. Please press the star and one on you touched on phones, you may remove yourself from the queue at any time by pressing the pound key once again that is star and wanted to ask a question, we will pause for a moment to allow questions to queue.
And it looks like we have a question from Brian.
Your line is open. Please go ahead.
Hi, everyone. Thanks for taking my questions. This is Jacob on for Brian.
Clearly your North American operations are benefiting from the federal funds can you talk about your international positioning and what are the growth rates like and how much faster do you think you can grow.
Okay.
Yes.
Thanks for the question. This is Michael I'll say, a couple of things and then in the patent box for free to jump in so when we look at the globe. The U S is absolutely our number one growth market, we're seeing more spending happened in the U S. And we are in other countries and so we have a tremendous focus on the U S. But there are other countries around the world, including throughout Europe that are also seeing high growth, Germany would be one that we talk.
A lot about.
Other areas, maybe a little bit more static but in general when you look at the globe is a whole minus China, which is the way the way that we look at the the opportunity.
And we're seeing double digit growth.
And that's true in the U S and that's true in other countries in aggregate around the world and so there's absolutely opportunity all over now as far as federal funding.
Substantially more federal funding in the U S. It's been applied but there are other programs internationally as well, where we're seeing we're seeing a federal funds as well available for school systems in other countries, but again I would say absolutely. The U S is number one market share on that we'd be Germany, and certain other territories throughout Europe, and then and then and then other other territories around the world.
Yeah, I mean, just to go a bit more color on line in Q1, we had in Germany, specifically, we had 73% year on year growth in revenue okay.
Significant growth rates.
Yeah.
Hum.
Given the timing on some of those federal funding packages in the U S and talked about maybe in some other countries around the world.
One being recent do you expect the seasonality of more be more pronounced this year, meaning in the second half for the year might be more sick the.
Might account for a significantly higher percentage of annual revenue.
That's a good question, Yeah, I think we're still figuring that out.
If the federal funding that's being made available if that's if that spend more quickly than I think absolute debt that will be the case, but I think it's yet to be seen how quickly. Some of these funds will be spent I will say that we are seeing spending now from the cares Act money and you'll remember the cares Act wouldn't play in March of last year, and we're receiving orders now where schools.
A year later, our spending that cares act money in that cares Act money that was part of a two trillion dollar cares Act with 30 about $31 billion was allocated education.
You'll remember that in December there was another COVID-19 released acted here that was about $82 billion for education and then in March. The most recent stimulus package that was $170 billion for education. So we're definitely going to see a lot more money flowing in I would I would anticipate the vast majority of that is going to lag into next year, but we do.
Expect to have with seasonality a stronger second half of the year than first half of the year that's for certain.
Yes.
Okay.
Okay.
One more on I'll hop back in the queue. If I have any more can you talk about the supply chain is there any quantifiable impact I think you mentioned about 4% on gross margin, but any impact that you're seeing on revenue and orders in and then continuing gross margin and also on building inventory is there any more color you can.
Could give on that and how long you might expect this to last.
Yes, So let me tackle the latter part of the question in and I'll cover the rest so as far as timing.
It's uncertain, it's a global problem is as we mentioned in our remarks, it's affecting.
Those in our industry as well as many outside of our industry anybody that utilizes chips and components and for technology, and even metals and plastics, we're seeing potential shortages have so I will say that we're.
We're managing it the best we can we're ordering out way in advance.
And in the remarks, we've ordered as you ended the year. So that's well beyond where we normally would order out we're seeing lead times at 46 months and so we're planning accordingly, it has not affected us in a major way to this point in time and deliveries there've been some slippage of deliveries, but generally for meeting our delivery time frames. We believe that's still going to happen in Q2 that will meet our time frame there is.
For a little more uncertainty around Q3, Q4, but like I said, we're doing everything we can and manage that as far as impact on orders, we're not seeing any impact on orders, we're seeing a tremendous amount of orders and I think if we're better off than the competition will be putting on advantaged.
Advantageous for Ya Qin please.
I think we may be receiving some orders that maybe could have gone somewhere else and then as far as financial impact you heard the 4% that that's related to shipping costs. We are seeing also additional cost of goods in the cost of our our our technologies and that's in the way of increases in prices on components and increases.
And the bill of materials from our manufacturers, but we're trying to offset that as best we can in many cases, we've been able to increase prices to our customers and that helps offset that and negotiate the best we came on the manufacturers and you can see in Q1, our gross profit when you adjust for those purchase accounting adjustments were 20 points, which we're happy with.
You know that 28% gross profit margin as compared to you'll remember Q4, we had about a 26, 5% comparable gross profit margin. So we're training on the right direction, we think as some of these concerns around increase in pass around freight and materials as those starts to normalize we ought to gravitate.
More towards around that 30 points of gross profit margin.
Yeah.
And Michael I would just add to that too old for the points in terms of the supply chain on in terms of what we're doing in terms of pre planning. So it sounds about working capital when you look on the balance sheet, you'll see the shift actually moving into an increase in inventory.
On the prepared for that so we're also as Michael mentioned, we have kind of line of lead times around for six months. So we are asking.
For your planning against that on actually stocking accordingly.
Great. Thanks, so much guys.
Yes, thank you for the questions.
Once again that is star and wanted to ask a question. We will take our next question from Jack Vander <unk>. Your line is open. Please go ahead.
Okay great.
Hey, Michael Hey team.
Solid results strong guidance.
On a couple of questions I'll start with Michael.
So in your your recent shareholder letter.
Indicated an expectation for at least $40 million of customer orders and you raised your revenue to over at least $31 million of revenue.
But clearly based on today's results.
To believe exceeded both of those targets.
Over $47 million of orders in over 33 million on revenue can you just maybe speak to some of the drivers that led to that positive delta or upside surprise.
Yeah, Yeah. So a couple of things one we are seeing increased demand even beyond our internal targets in the industry and that's a function of additional focus on technology buying some of that is because.
A lot of classrooms are going back to traditional or hybrid learning that puts more focus on it. There's also a lot more political focus on technology in the classroom. But then also there is an immense need for educators and students to have technology to be able to return to learn and bridge learning GAAP and be effective. So that's part of it just a general industry on top of that you heard us.
Talk about federal funding that also is driving additional demand knowing that these federal funds are coming and those funds are expected to be utilized towards these technologies that we're providing and then I would add on top of that where we're a healthier company now than we've been in the past we had some challenges that you go back a few quarters you know Jack as you followed us for quite some time and so on <unk>.
By nature of being a healthier company I believe there's a lot more confidence from end users. There's a lot more confidence from our partners. We saw through reseller partners and so a lot of those partners now believe in us and they're standardizing more on our solutions.
And then also we have a steady stream of supply a solution. So that that provides you know again.
Now more confidence from the partners and then it comes down to just the solutions themselves. We have the best solutions in the industry, we're telling that story, we're out there with sharing that we're investing more on our sales team and all of that is generating results I would say in general the uptick in additional orders the uptick in sales as a result of those mix that mix of items.
Now from when we provided guidance to the sales figures coming at higher now that came down to us reconciling towards ended the quarter and and figuring out what those numbers would be and we were trying to be conservative when we put the numbers out there and I was pleasantly surprised that we came in well above our initial numbers. We were looking at so that was just a nice nice surprise, but but we knew that.
We're in a good place with the guidance on the 31 million of revenue on greater than 40 million in orders.
Yeah.
I'm on Mike I'll, just put a bit more color on that you know we're winning we are winning.
But we're playing we're winning you know.
Where we're really investing heavily on the sales team.
On heavily trying to we know we got the best products, Okay, we're winning and.
Got decided on a weighted and so the wind in our sales and you know so well.
We'll get a lot of good results. So you know when he loved at Otis.
Yeah.
Got it fantastic I appreciate the day.
Deep color there that's helpful.
And then just if I, if I turn to.
Speaking of federal funding opportunity and there's only a few questions on this already but just.
Just.
How how many of your districts are being you know are actively in discussions on your channel partners on your district partners. How many of them are you actually working with currently or had have ongoing communications.
There is an actual real.
Immediate or pending expected opportunity there too to access this funding and all of your districts.
So many school districts in classrooms that you're on.
Already penetrated in all across the country is there is it is this happening universally across all your different territories and districts or is it kind of.
Often on here are spotty I should say and then ramping up to it.
Michael do you want to take that I mean, I I mean simply is everywhere right. It's consistent it's everywhere.
That's right yeah.
Yes.
Obviously in the U S. Every district in is in the U S is getting allocation of funds. So they're talking about it I would say the majority of those districts have minimal experience and knowing how to access those funds. So they're scrambling to do that and we provide a lot of resources around that we have a team that helps those districts access funds and understand how to utilize those funds, we put out a new guy.
Just a couple of weeks ago and that that's a detailed guide of school districts. They can read that guide and understand you know more about utilization of the funds and accessing the funds, but but we're happy also to provide additional resources beyond that outside of the U S and other countries, where theres funds allocated same thing you know everybody knows that the funds are out there and looking to access those funds.
Yes, just a bit more insight Oh I'm sorry.
Alright.
So the other key things looked at in the U S is the penetration rate. So the penetration rate of IC days on the U S is actually ex significantly lower than EMEA. Okay that means the opportunity for us is significantly greater in the U S. So that's why we're expecting Scott.
Significant growth rates from the U S side of our business.
Yeah, I'm glad you brought that up because that's what I was going to follow up on is just in terms of the overall opportunity of how many I imagine that if theres a lot of school districts, maybe they have they havent been renovated or newer.
On your technology.
<unk> implemented yet and for the classrooms.
Expecting that this could be an opportunity for those districts to actually get some federal funding to actually make that happen.
Which does this open the door then to a lot of new customers coming to you know like other districts that didn't already have an interactive technology is already built into their into their classrooms that you werent already helping our servicing and any kind of way, but now because of federal funding, they're coming to you on saying and knocking on your door.
Yes. So there is absolutely some of that and Jack I would add too. There. There are a lot of districts that were planning on technology refreshes or new technologies in their district, but they didnt have the funds allocated and so now that they have this new funding coming they are accelerating some of those decisions, but I think to Mark's point you know a couple a couple of thoughts I think we're in for it so.
One is definitely districts that don't have the technologies, we sell it as an opportunity for us to sell on but also there's a large districts that are doing refreshes of technologies. They put in play so it could have been five or even 10 years ago, and and and and the solutions, we're selling with interactive flat panels various hardware solutions most of those.
About a five to seven year lifecycle and so when you install the solutions five years to seven years later, we're doing a major refresh and if you look at some of the largest districts, where we have been selling like San Diego, We've talked about we're Montgomery County, or Clayton County in Georgia, Our view for County, South Carolina, those were actually refreshes of our competitors.
He is right on the interactive whiteboards or other interactive flat panels on those districts and they're replacing that old technology with our newer interactive flat panels, which are for K high definition with app stores and other other technologies that were including.
I mean, just I mean on average every single classroom in the U S effectively you have $75000.
Spend on it it's like well they gotta spend it all on on Tech.
All of this is pretty much high up there on and we know we've got a lot for technical solutions for those classrooms.
So we think we're well positioned.
Yeah.
Got it.
Helpful guys and then just another question on chips that second quarter guidance.
Very strong guidance. It was ahead of my expectations.
For revenue of 30 was it $39 million.
And in at least $1 billion of adjusted EBITDA.
Just wondering about that adjusted EBITDA number of at least $1 million.
How how conservative or how much wiggle room is built into that just given your commentary on the supply shortage of components and is there is that like risk adjusted for that and.
And maybe some gross margin hiccups just.
You know how much cushion are you baking into their because given you just did over $1 6 million of EBITDA basically for the first quarter on less revenue. So just trying to figure out if that's a conservative target or not.
Yes, two reasons for that Jack So what one is youre absolutely right its risk risk adjusted for potentially some higher cost.
Around or inventories, we bring it in as well as delivery of those goods, but then also.
We've been focused on broadening our sales team and increasing some of our marketing spend and we've been absolutely focused on taking market share and that gives us a little buffer as well for some of the expansion a little bit a little bit of expansion on our opex.
As well so it's a combination of those two we say at least right. So there's definitely some room to be much higher than that and we expect we will be higher than that but but that $1 million was was a conservative estimate to provide.
Yeah.
Okay.
And then maybe just lastly.
In terms of your geographical focus you've been gaining market shares you know last quarter. You did mention that you took the number one market share in Australia.
Maybe an update around around you know.
Are you, making any any noticeable material headwinds, it's only been a couple of months, maybe a month or two since we last spoke but.
What's the next market share that you see yourself.
Yes.
The latter up the quickest.
In terms of geographical region.
So let me say, it's Michael do you want to take that.
Yeah go ahead Mark.
Yeah. So in terms of that data in terms of.
That report the next one comes out about six weeks' time. So we'll have that shortly and then we will be able to show you know where we are in terms of our actual statistics and our market share.
But in terms of where I see the growth on a wear where if I could get a tight market I think.
The U S.
I think Germany.
I think the U K, we're already very strong I think we could since you got the second position.
I'm looking at the volumes that we're doing the actual quantities that would take what otherwise she setting an IP days on it it's really quite staggering.
With that with day and the volume so.
I think really for us the key targets I'll take your market share on the U S market share in Germany.
And then other parts of northern Europe. So.
For these best Guy who can get.
Okay. That's helpful and actually I do have one more question I apologize on on the Samsung arrangement or partnership.
It seems like it's starting to finally kicked in a little bit here wondering how your second quarter revenue guidance.
Contemplate contribution from Samsung in any shape or form isn't meaningful and then also do you still expect Samsung to really materially ramp into a real revenue.
Revenue contributor.
During the back half of this year.
Okay.
Do you on later Michael on your mid to late.
Yes.
I'll take just a couple of things you know how do you feel on the gas. It. So the answer is we have not baked in substantial sales at this point too.
So our Q2 of Samsung because we believe the ramping is going to be in the latter part of the year and we've only of course guidance for Q2, we do think it can start to be significant and we said that in our remarks.
A nice movement and in the right direction was the announcement, we made on our remarks of $1 million in in in licensing or selling Armenia connect and other solutions to Samsung and their agreement that every interactive flat panels on the education every Samsung interactive flat panel sold in education in the U S will be accompanied.
With our <unk> software so that is a movement in the right direction now the recognition of that revenue.
Still need to model that but it's going to be over a period of time because those mineral connect licenses are three year licenses and so we'll have to look at how that revenue is recognized but that was nice move into bringing that million dollars of orders off of that software platform and our training and some other software and content that we're providing.
So, but again I think you know come come next quarter, we should have a better grasp on where we are with Samsung and be able to provide more updates.
Yeah.
Yeah.
Fantastic It sounds like.
There's a lot of it's just it's a conservative embedded contribution from Samsung in that guide.
Strong second quarter revenue Guide said, that's that's great to hear.
It means there's probably room for upside down the road here as you progress that's it from me guys. Thank you.
Yeah. Thank you Jack.
Hum.
Our next question comes from Chad.
Your line is open. Please go ahead.
Hi, good afternoon, and congratulations on the on the really good quarter.
For bauxite.
Actually just just a quick comment mainly because I work with federal grants.
I just really.
I appreciate the approach that that you all are taking in terms of setting up kind of AR and education and assistance Center for school districts to take advantage of the federal funding I know on my line of work.
The the capacity to apply for that seems to be one of the biggest bottlenecks.
And so for my first question kind of relates to that.
Given our debt debt that I think you've deployed a really good strategy. There are you seeing kind of an acceleration in our <unk> and.
And kind of request for help on demand and that type of thing because I think I have recently heard that only maybe about 3% to 5% of that funding for school districts have already been expense. So it seems like there's just a huge opportunity there.
Yes, Chad that's a good question. So the answer is yes, we're seeing it we're seeing a significant ramp in and questions and requests for assistance in accessing funding.
Absolutely the vast majority of the federal funding has not been spent or access even though the cares Act I just a few weeks ago I saw an update to our report that showed that maybe as much as maybe a half had been spent so theres still a substantial amount or allocated so there's still a substantial amount of even that first tranche of cares act money that is yet to be allocated so.
The answer is yes, we're seeing that ramp and we feel like us putting out the guide that we produce just a couple of weeks ago and having internal resources that the timing is right to where at where we're gonna be a resource as more and more questions ramp.
Great, great, well and kind of tied to that maybe.
One of the things that caught my ear was the the increase that youre going to have in our sales team I think increasing from around 40 to 200 with at least I think here in the states.
And I was wondering if you could just provide maybe a little more color on that from the standpoint of.
Are you at the point, where youre kind of seeing so much demand that youre going to have.
Are you expecting kind of a huge material impact by expanding that sales team.
And in that area I was just wondering if you could comment on that.
Yeah, Let me tell you that for us the mic. So yeah. So just to make that clear. So currently we have on these all ex that'll. These our salespeople are partners, who can sell a.
A friend a case at the moment, we only have about 40.
People salespeople to apartments, who are able to self lever for us because we have a very very tightly controlled channel because we have exclusivity with 10 day because.
As if the merger between T on trucks trucks have significantly below they have about 160, south equals and we are in discussions about that exclusivity agreement on extending that to trucks now like merge with TNT on there.
Therefore, the amount of ex total salespeople on partners, who are able to sell cloud will increase significantly from about 40 to 200.
So it's not as important as people those are salespeople already employed by our partners.
The number of people who are now eligible unable to sell club on such will increase by about five ex that.
So that's the first part of the question. The second part is is it the day Mount that absolutely there is 100%.
Okay.
I'd add just to clarify that we sell through channel partners value added reseller partners. So we don't sell direct in most cases to end users and.
And we have over a thousand of those partners across the globe. We have about 300 of those partners in the U S. For example, and in the majority of the remainder of our throughout Europe.
But those partners have in aggregate thousands of rats, you know youre hearing about trucks guarantee but there's thousands of reps out there that support support box line in selling our solutions and represent our brand.
<unk>, we have dozens of salespeople to help support them, but we are selling through these these reseller channel partners now of those parties you heard Pat mentioned in his remarks that the top 20 of those partners make up just over 60% of our total sales. So we do have some very significant partners like the trucks you didn't hear on each of the world, but we do have a substantial number.
For a partner beyond that they do order from us on seller solutions.
Okay, great great. Thank you.
And my final question is focuses on I was wondering if you might comment a little bit on.
What youre seeing in terms of our forward looking in terms of the software solutions I. You've commented a couple times I think on the <unk> connect licensing and those kinds of things on my assumption of course is a software solutions are going to be probably a higher margin product and let's say hardware and.
What are you seeing I think in terms of the horizon for kind of the software aspect.
Just be on the hardware. Thank you.
Yeah, So Chad the way, we think of our solutions as we look at different product categories. So it starts with displays displays represented as we've mentioned over 70% of our total sales. So that's our largest category, but but those those are largely interactive flat panel displays.
On top of that we sell accessories accessories include mountains. It stands for displays but also our audio solution and document cameras and we are tablets for the teacher. We have student response devices are those all fit into accessories.
And then we sell software that's a category, we breakout stem stem standing for science technology Engineering and math that includes a robotic solution a three D. Printing solution. We are a science device that we sell and then lastly, we have a professional services division they provide training and professional development.
And we charge for that and we provide that in some cases.
District wide width with large contract in other cases, we're providing online self paced or variations in between so you really have five product categories that we look at now today again, the largest categories interactive displays, but as we march into the future part of our our aim and vision for the company should be able to increase those other categories much.
Faster than the rate at which interactive displays are growing so that our product mix is less heavily weighted toward displays. So im giving you a roundabout answer that your debt, yes, absolutely. We think that software will be a much higher percentage over total sales as will be services and accessories and stem solutions on all of those are much higher margin SaaS.
Where is he asked about software margin and that's almost entirely margin for us up in the gross profit margin because most of that cost is actually captured down in our operating expense is now internally, we evaluated a little differently, but if youre looking from an external standpoint, yes, that's going to be very very high margin. But then also if you look at accessories. Most of those are 40 or 50 plus.
For scent margin or professional services is 40 plus percent margin our stem solutions largely are as much as 50 plus percent margin and so you know again as a company, we're focusing on improving the product mix improving our gross profit margins and software is absolutely a large part of that strategy.
Thank you and I actually appreciate the more comprehensive answer to that well that's the that's all the questions I had and again congratulations on a great quarter. Thank you.
Thank you Chad.
Once again that is star and wanted to ask a question.
And it appears that we have no further questions at this time I will now turn the program back over to Michael Perlman.
Thank you everyone for your support and for joining US today on our first quarter 2021 conference call. We look forward to speaking to you again in August when we report our second quarter 2021 results.
Yes.
This does conclude today's program. Thank you for your participation you may disconnect at this time.
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Okay.
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