Q4 2021 Boxlight Corp Earnings Call
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Thank you and welcome to the box late fourth quarter and full year 2021 earnings conference call.
By now everyone should have access to the press release issued this afternoon.
This call is being webcast that is available for replay.
The remarks today will include statements that are considered forward looking within the meaning of the 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 question.
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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 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 10-K 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 analytic tools to understand the company's operations. The company has provided reconciliations.
The most directly comparable GAAP financial measures in the earnings press release, which will be posted on the Investor Relations section of the company's website at investors Dropbox light dotcom.
With that I'll hand, the call over to box like Chairman and Chief Executive Officer, Michael Pope.
Hello, everyone and thank you for joining the call.
Despite significant uncertainty in the world today, including growing concerns with the war in Ukraine, and ongoing battle with COVID-19, rising energy costs rapid inflation continued supply chain and logistic challenges and overall volatility in global equity markets, we continue to see growing demand for Ferrari.
Interactive solutions and our outlook is overwhelmingly positive.
We have reported double digit or greater revenue growth for five consecutive quarters.
Positive profitability trend and significantly improved working capital.
Just two years prior we reported the full year 2019 results with $31 million in orders $33 million in revenue and an adjusted EBITDA loss of $6 million. We are a dramatically larger company today benefiting from both market expansion and strategic acquisitions for.
For the full year 2021 on a pro forma combined basis with front row, we generated $250 million in orders $215 million in revenue and $21 million and adjusted EBITDA.
We are gaining on our key competitors with an aim to achieve the top industry position in each of our product categories.
For the fourth quarter, excluding front row, we reported $44 million in revenue exceeding our guidance of $40 million and delivered organic growth of 38% over the fourth quarter of 2020.
The financial results of front row were not included in our Q4 financial statements because we completed the acquisition on December 31, However, due to significant one time costs incurred to complete the acquisition and related financing we experience inflated operating expenses, Additionally, supply chain and logistics costs.
Hi, during the quarter impacting our gross profit margin as a result of these additional expenses, we reported a fourth quarter adjusted EBITDA loss of $2 million.
We concluded the fourth quarter with an improved balance sheet, including $18 million in cash $53 million in working capital and $52 million and net assets.
For the current year, we are experiencing stronger than expected customer order intake as well as growth in our sales pipeline and have lifted our guidance for the full year to $250 million in revenue and $26 million and adjusted EBITDA for.
For Q1, we expect $44 million in revenue and $2 million and adjusted EBITDA.
On December 31st we formally closed the acquisition of front row, a leading provider of classroom audio and campus communications solutions for the education market. The purchase price was $23 million net of $12 million in acquired working capital given the company generated greater than $7 million in EBITDA for 2021.
Prior to transaction adjustments, the resulting valuation was very attractive at less than four times EBITDA.
We have identified classroom campus audio solutions as our top growth opportunity and front row was a clear strategic fit.
We are now integrating the company into a box that ecosystem and benefiting from a broader solution suite, along with our combined sales resources and global reseller channel.
We are also in a position to expand our communication systems with fully integrated audio and video throughout an entire campus a significant competitive advantage.
For the full year 2022, we expect front road contribute greater than $32 million in revenue and $8 million in EBITDA.
Also on December 31, we secured a $58 $5 million loan from White Hot capital partners, providing funding to complete the front row acquisition refinance existing debt with Sally poor commercial finance and Lynn Global asset management and allows for general working capital.
Facility provides an additional $10 million in borrowing.
During Q4, we published seven case studies with detail the successful implementation of box solutions and a broad range of education and enterprise environments. They included Corriedale Academy and Cardiff Metropolitan University in the U K or public schools and Phoenix Unified High School.
Strict in the U S and star car rental in Germany.
One of our case studies featured our strong relationship with Clayton County public schools. The fifth largest school district in Georgia, We are working closely with Clayton County to provide teachers and staff with customized training and support and have renewed our professional development contract with the district for a third year Enel.
Another success story showcasing our utility and higher education featured Joseph Chamberlain College in the UK.
Which upgraded from underperforming competitor screens to our impact interactive channels and see them serious digital signage displays along with clever touch wise are flexible and customizable content management platform.
Our case studies and success stories reaffirm our dedication to be a trusted ally for our customers by providing turnkey solutions that are cutting edge comprehensive and can be fully integrated and treat our diverse communication environments.
Adding to the many accolades we've received from industry leaders are clever touch brand won two awards during Q4, our info Com 2021 best in show for the impact plus interactive touch screen and best in show digital signage for clever touch lives.
We continue to innovate and release several product updates and feature additions that differentiate us from the competition, including.
A new generation of interactive in non interactive flat panels enhancements to our menu connect blended learning platform.
Improved tools to our Lynx whiteboard annotation and lesson plans software the ability to access our clever store three education apps via a web browser additional screen sharing tools using clever share fives and the addition of sensor technologies to monitor air quality and meeting spaces among others.
Of course, our success to this point along with our ability to continue to deliver growth and profitability is a direct result of our talented and dedicated employees and our support of channel partners.
With that I will now turn the call over to our president Mark Starkey to provide additional insights.
Thank you Michael.
Happy St Patrick's day to everyone on the call.
Q4 was another record quarter for bauxite.
I take this opportunity just like all our staff and our customers who have helped contribute to our success.
During the quarter.
During Q4, we booked $42 million of orders when partners up from $33 million for the same period last year that represents.
Organic growth of 25% year on year.
For the full year, our order intake was $216 million compared with $57 million in 2020, representing 293% year on year growth.
Some of our key orders received during the quarter included $3 $1 million from unit decay in Denmark, where we retain our number one market share position and 23% share of interactive displays.
In the U S. We had significant orders from Blue previously trucks $2 6 million.
Central technologies based in Tennessee, the $2 5 million.
Dni's distributed $2 2 million.
$1 9 million from ICT advanced classroom technologies.
Zero point $9 million.
Data protection in Texas to name, but a few.
Overall, our market share of interactive displays in the U S has more than doubled over the past two years to greater than 7% according to future source.
In Australia, we continue to hold the largest market share with 26% of total IPD sold and received a further $2 $2 million of orders from our partner ASI.
In France, we received $1 $3 million of orders.
Specie and in the U K, where we have 16% of the IPD market share. We received orders from over 100 partners, including $1 $1 million from Roche, ABB and <unk> $9 million from Ibms.
This highlights the quality and diversity of our customer base, especially across the U S and EMEA.
We are also developing very successful partnerships in Australia, South Africa, and South America.
During Q4, we also had our first major win in Japan, where our clever touch solution was selected for ease of use with the students Apple devices.
In Russia, we have temporarily suspended our business relationship with a partner and some pieces bug.
Although we do not expect any significant impact in our revenues and growth as a result of the war in Ukraine.
As previously mentioned in September 2021, we signed an exclusive contract with trucks now Blue, which was a merger between our two largest partners.
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The contract gives bloom exclusive Brian so clever touching 49 of the 50 states in the U S and Canada.
Q4 was our first quarter trading with a new contract with a number of salespeople who are actively selling clever touch in the U S. Increasing substantially from 40 heads to over 200 Hertz.
I can now report that our sales pipeline has expanded significantly with flu and currently extends to over $20 million quantified opportunities.
<unk> now been actively sold in all 50 states, including Canada with just a few months ago clever touch was only present in 20 states.
This means that both of our IPD brands, maybe I'm clever touch are being proactively sold across all states in the U S by our channel partners.
The acquisition of front row fits very well into our portfolio and gives us iPhone plastic audio solution for the K 12 marketplace.
We expect that the acquisition will be more will be accretive to our collective revenue and more importantly to our gross profit, which we anticipate will continue to improve throughout 2022.
As a result of the increase in gross profit margin along with top line sales growth, we expect $26 million and adjusted EBITDA. This year.
Equates to more than 29% organic growth in adjusted EBITDA for 2022.
In terms of end users, we had another quarter of fantastic wins.
One notable win was with MIT.
Midland Isd in Texas, where we continue to rollout Kevin touch panels across the whole School district.
In total we expect Midland by States take over 4000 screens.
Midland continue to buy a solution could dominantly because a clever message because of our cloud managed solution, enabling the scotia less across the district.
In Switzerland, we received an order file a local partner for 158 six inch impact plus screens from the city of Cafe.
They noted that the clever touch MDM solution with the main reason for selecting and screens.
Our stent business is also starting to gain traction as COVID-19 restrictions begin to ease.
In Poland, we receive an order for 373 D printers, including <unk> platform activity and curriculum content to be supplied to schools across the country.
There are 13000 schools in Poland on each school is required to have at least two three D printers.
Our solution was recommended to the Polish educational authorities and we expect further significant orders in the coming quarters.
Our software revenues continue to rise as we pursue a dual strategy of selling out of many of the end of the software on the <unk> and OEM agreements to customers such as Samsung New line at school districts as well as embedding a minivan and clever touch software solutions into our own products.
Our octopus OEM software revenues increased from <unk> 7 million in 2020 to $1 3 million in 2021, an increase of 90% year on year and.
And sales of many of software increased from $96000 in 2000 $20 million to $1 million in 2021. Following a first order when they connect with March 'twenty one.
Combined our software revenues grew by over 200% from zero point $8 million in 2020 to $2 4 million in 2021.
We also launched a new cloud based version of Lynx Whiteboard in September 21.
And have had some unprecedented response.
Using Google analytics, we've known in the past five months since launch we have had 523 titles and live sessions on Lynx with an average duration of 54 minutes each.
More than 53 years of lessons being delivered on a platform in the first five months since link what board was launched.
We are therefore confident of delivering more than 1 million lessons over the Lynx platform.
First year.
And we will look at the best ways to monetize the solution moving forward.
Ultimately the fact that we own a growing suite of software IP enables us to differentiate our products from the competition.
In summary, Q4 was a very strong quarter in terms of order intake and revenue and our solution for cable a lot 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 Q1.
With that I will now turn the call over to our CFO Patrick Foley.
Thanks, Mark and good afternoon, everyone.
To further expand on what you've already heard from Michael and Mark I would like to add a few figures to provide context to book flights International operations.
So revenue by country and region. Our total revenue in Q4 was $44 million EMEA.
EMEA was 55% to $24 3 million of which the UK represented 34%.
The Americas, 38% to $16 $5 million and the rest of the world, 7% $3 $2 million, which was mainly Australia.
The top 10 customers represented approximately 44% of total sales in Q4 with the fingers flawed single largest customer at approximately 9% and these are based across a number of markets, namely the U S, Denmark, Australia, Finland, France and Spain.
The top 20 customers represented approximately 57% where the mix is slightly different to previous quarters, where this was running around 66%.
For our sales product mix and margins in Q4 hardware remained the largest proportion of total revenues at 91%.
These will largely sales of interactive flat panel displays and represented 90% of this total with related accessories being the balance of 10%.
The balance of all of our total revenues coming from software services and stem solutions.
Gross margin for the quarter was 21, 2%.
The <unk> margin was about 20%, which means slightly higher however, its previously reported with increased global shipping costs, where we're still seeing four times normal rates.
Have reduced margins by up to four percentage points.
We anticipate the higher costs will remain.
As noted in previous quarters, we have experienced some supply chain challenges, including interruptions to inventory production schedules as apply supply.
Continued delays in shipping and receiving goods.
We've seen manufacturing costs increased due to these issues, which have impacted gross margins.
In Q4, the education sector represented 91.5% of all interactive display sales with about 73% of these with 75 inch and 86 inch panels, which follows the consistent trends we have seen throughout 2021.
I will now review our fourth quarter results.
The financial results for the three months ended December 31 2021.
Revenues for the three months ended December 31, 2021 were $44 million as compared to $31 9 million.
For the three months ended December 31, 2020, resulting in 38% organic growth.
Gross profit for the three months ended December 31, 2021 was $9 3 million as compared to $3 6 million for.
For the three months ended December 31 2020.
The gross profit margin for the three months ended December 31, 2021 was 21, 2%, which is an improvement of 100 basis points compared to the three months ended December 31 2020.
Gross profit margin adjusted for the net effect of acquisition related purchase accounting was 28, 1% as compared to the 26, 4% as adjusted reported for the three months ended December 31 2020.
As reported in previous quarters. This year gross margins have been adversely impacted by approximately four percentage points due to increased pricing customs costs caused by supply chain challenges associated with the effects of COVID-19.
Additional pressure on margin has been seen on the cost of manufacturing.
Which has led to an adverse impact of approximately 4% in the quarter.
Total operating expenses for the three months ended December 31, 2021 were $14 9 million as compared to $11 1 million for the three months ended December 31 2020.
The increase primarily arose from head counts and other related overhead expenses and significant onetime costs related to the front row transaction in Whitehall financing.
Other income expense for the three months ended December 31, 2021, with net expense of $2 2 million as compared to net expense of $1 9 million for the three months ended December 31 2020.
Other expense increased primarily due to $1 $6 million losses recognized upon the settlement of debt obligations.
The company reported net loss of $7 1 million for the three months ended December 31 2021.
Compared to a net loss of $8 $6 million for the three months ended December 31 2020.
The $7 $1 million loss includes more than $1 5 million of costs associated with financing and front row transactions as well as the retirement of the Linde and solid pool at that.
The net loss attributable to common shareholders was $7 5 million and $8 9 million for the three months ended December 31, 2021, and 2020, respectively.
After deducting the fixed dividend the series B preferred shareholders of $317000 in 2021 and $338000 in 2020.
Total comprehensive loss was $6 9 million and $3 2 million for the three months ended December 31, 2021 and 2020.
Reflecting the effect of cumulative foreign currency translation adjustments on consolidation with.
With the net effect in the quarter up $275000 gain and $5 $3 million gain for the three months ended December 31, 2021, and 2020, respectively.
The EPS for the three months ended December 31, 2021 was 11 <unk>.