Q1 2022 Boxlight Corp Earnings Call
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Good afternoon, ladies and gentlemen, thank you for holding your conference will begin in just a couple of minutes. Thank you for holding your conference will begin in just a couple of minutes.
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Okay.
Thank you and welcome to the Fox <unk> first quarter 2020 earnings Conference call.
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.
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 discussion of such risks and uncertainties are contained in the company's most recent Form 10-K Form 10-Q.
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.
When used in combination with GAAP results provide additional analytical tools to understand the company's operations.
The company has provided reconciliations to 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.
Investor.
Bauxite Dot com.
I'll hand over the call to box <unk>, Chairman and Chief Executive Officer, Michael Pope.
Hello, everyone and thank you for joining the call today, we will be publishing a press release with our Q1 results shortly which will be available in the next few minutes.
We made substantial progress during the first quarter across several key company initiatives and delivered another strong financial performance with $64 million in customer orders $51 million in revenue and $1 $2 million and adjusted EBITDA.
We are experiencing growing demand for our solutions globally as evidenced by our organic growth of 23% in customer orders and 34% and revenue over the first quarter last year.
We also concluded Q1 with $43 million in back orders, a 66% organic increase over Q1 last year and a healthy balance sheet with $11 million in cash $49 million and inventory $50 million and working capital and $47 million and net assets.
Despite continued supply chain logistics and other challenges we are operating at a very high level and for the second quarter, we expect to deliver $54 million in revenue and greater than $2 million and adjusted EBITDA.
There are a substantial number of orders, which would have shipped in Q2 that will now ship in early Q3 as a result of product delays. However, we still expect to achieve our full year guidance of $250 million in revenue and $26 million and adjusted EBITDA.
We began 2022 with multiple <unk> and learning awards in the primary and secondary education categories for our <unk> connect blended learning platform pro color interactive displays <unk> curriculum and professional development services.
Additionally, just this week, we received several awards from innovate magazine, including Education technology innovation of the year for our clever touch impact plus touch screen and overall business growth for our clever test brand.
During Q1, we launched our mimulus stem mobile mission to Mars experience, a mobile van that is traversing across the country led by Braydon Moreno director of stem Mimeo stem mobile van is completely equipped with our award winning stem solutions and a pro color interactive display and it's designed to showcase our solutions.
The district and school leadership through hands on activities based on Mars exploration, you can track rate and receive mimeo stem mobile updates on our social media pages.
We are pleased with our continued progress integrating our hardware software solutions over the next several weeks, we will be releasing significant enhancements between our front row.
Conductor campus communication platform, and our <unk> message and clever catch live embedded messaging signage solutions, we plan to release and demonstrate the significant combined platform during the SD Education Conference in New Orleans in June .
Just a few weeks ago March the six year anniversary of our acquisition of <unk> in April of 2016 later that year. We also acquired the bauxite group positioning us as a formidable education technology provider from 2016 to date, we have acquired a total of 11 companies, including Sahar in 2020.
In front row in 2021, and we are growing from $0 in revenue to an expected $250 million in revenue. This year I am proud of the company. We're building complete with extremely talented employees industry best solutions and a vision to be a leading provider of interactive technologies for both education and enterprise.
Environments.
Last month, we announced that Patrick <unk>, who will be stepping down as chief Financial Officer, Pat has been an integral part of our executive team and has provided exceptional leadership through a critical time, including our merger with Sahara the acquisitions of interactive concepts in front row at debt refinancing with White Hot capital partners the adoption of various <unk>.
<unk> processes and procedures among other achievements.
We are evaluating candidates now to step into the CFO role and Pat has agreed to ensure a smooth transition I consider pad a good friend and we wish him the absolute best in the future.
With that I will now turn the time over to Mark Starkey to provide additional insights.
Thank you Michael and good evening from Barcelona, where we are showcasing our solutions to corporate and government customers. The international ISC events, we've had a fantastic three days here in Barcelona, where we have won the award for best business growth in the second award the best educational technology.
Q1 was another strong quarter for us as Michael mentioned earlier Q1 revenues grew by 51%.
34% on an organic basis in.
In terms of bookings, we received up $64 million of orders.
<unk>, 34% growth in Q1.
If we exclude front row than the organic growth in order intake was 23% for the quarter.
Some of our key orders in the U S included $10 $9 million from Blu six.
$6 million, what distribution partner DLH.
$3 $2 million from central technologies of $1 $1 million from data protections.
Overseas, sorry overseas, we had some excellent orders, including $1 $9 million were partner in Denmark.
$1 $7 million from Roche audio.
Visual in the UK $1 $7 million Camber Lindsay in Puerto Rico, a $1 $5 billion ASR in Australia to highlight a few.
Approximately 54% of all orders were received from the U S with EMEA accounting for about 41% and the rest of the world accounting for approximately 5%.
We are seeing significant opportunities in all regions, but in particular, we see very large scale opportunities in the U S and in some parts of Europe .
The largest opportunities are predominantly in the education sector. While we are treating multiple tenders of 5% to 10000 screens at a time.
In the corporate sector, we are starting to see the return of work is for office environments and the need to upgrade the collaboration tools and huddle rooms, and lodge and meeting rooms with teams and zoom can possible solutions.
Our biggest challenge remains the management of the supply chain.
We have taken a very proactive stance towards logistics since the start of the pandemic and are ordering at least six to nine months ahead to ensure we have adequate supply to meet demand.
Excess logistics and freight costs are still impacting on our gross margins, but we have taken specific measures, particularly in the U S to address the problem.
Anticipate that gross profit percentages will continue to improve throughout Q2 and Q3.
In summary, Q1 was a very strong quarter in terms of order intake and revenue and our solutions that gets you a 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.
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.
Total revenue in Q1 was $50 6 million.
EMEA, 41% or $20 6 million of which the UK was 53%.
The Americas, 52% or $26 $5 million rest of the world, 7% $3 $5 million, which was mainly Australia.
The top 10 customers represent approximately 39% of total sales in Q1 with the single largest customer is approximately 16%.
And these are based across a number of markets, namely the U S. Australia, the UK, Denmark confronts.
The top 20 customers represents approximately 52%.
The sales product mix and gross margin in.
In Q1 hardware, including our integrated software solutions remained the largest proportion of total revenues about 90% of this total 76% with sales of interactive flat panel displays and 14% classroom audio solutions and the balance of 10% being related <unk> et cetera.
<unk>.
The balance of all of the total revenues coming from software services and stem solutions.
Gross margin for the quarter was 24, 9%. The IPD margin was approximately 20%, which would have been slightly higher however, as reported in previous quarters increased transportation cost have reduced margin. We anticipate these higher costs will remain throughout 2022.
In terms of our screen sizes.
Q1, 2022, the education sector represented 92, 8% of all interactive flat panel displays with approximately 75% with 75 inch and 86 inch panels, which follows a consistent trend we've seen over the past 12 months.
I will now review the first quarter results.
The financial results for the three months ended March 31 2022.
Revenues for the three months ended March 31, 2022 were $50 6 million as compared to $33 4 million.
For the three months ended March 31, 2021, resulting in a 51, 4% increase.
Primarily due to the inclusion of front row and increased demand for our solutions in the U S and Europe .
Gross profit for the three months ended March 31, 2022 was $12 $6 million.
As compared to $8 6 million for the three months ended March 31 2021.
The gross profit margin for the three months was 24, 9%, which is a reduction of seven basis points compared to the comparable three months in 2021.
Gross profit margin adjusted for the net effect of acquisition related purchase accounting was 27, 4% as compared to the 28.0% as adjusted reported for the three months ended March 31 2021.
As previously reported gross margins continued to be adversely impacted by supply chain challenges with increased freight costs, which are now expected to continue throughout 2022. However.
However, we anticipate gross profit percentage improvements in Q2 and beyond as a result of reduced manufacturing costs.
Total operating expenses for the three months ended March 31, 2022, with 16.0 million as.
As compared to $10 6 million.
For the three months ended March 31 2021.
The increase primarily resulted from additional overhead costs associated with the acquired front row operations included related intangibles amortization.
And growth in head count and other related expenses.
Other income expense for the three months ended March 31, 2022 was net expense of $1 $5 million as compared to net expense of $3 1 million.
For the three months ended March 31 2021.
The key movements were an increase in interest expense of $1 $3 million and a reduction of $1 8 million.
In previous losses recognized upon the settlement of debt obligations.
<unk> $8 million currency gain from the PPP loan forgiveness, and finally zero point $3 million reduction in changes in fair value of derivative liabilities.
The company reported net loss of $4 9 million for the three months ended March 31 2022.
As compared to a net loss of $5 $2 million for the three months ended March 31 2021.
The net loss attributable to common shareholders was $5 $2 million.
And $5 $5 million loss for the three months ended March 31, 2022, and 2021, respectively.
After deducting the fixed dividend to series B preferred shareholders of $317000 in both 2022 and 2021.
Total comprehensive loss was $6 6 million and $5 $4 million loss for the three months ended March 31, 2000, 22022 and 2021.
Reflecting the effect of foreign currency translation adjustments on consolidation.
With the net effect in the quarter of $1 $8 million loss and zero point $3 million loss for the three months ended March 31, 2022, and 2021, respectively.
The earning per share for the three months ended March 31, 2022, with a <unk> <unk> loss compared to one <unk> for the three months ended March 31 2021.
EBITDA for the three months ended March 31, 2022 was <unk> $3 million loss as compared to a $2 4 million dollar EBITDA loss for the three months ended March 31 2021.
Adjusted EBITDA for the three months ended March 31, 2022 was $1 $2 million as compared to $1 6 million for the three months ended March 31 2021.
Adjustments to EBITDA include stock based compensation expense gains losses recognized upon the settlement of certain debt instruments gains losses from the re measurement of derivative liabilities and the effects of purchase accounting adjustments in connection with acquisitions.
At March 31, 2022, BOP flights had $11 $3 million in cash and cash equivalents.
$49 6 million and working capital.
$49 $1 million inventory.
$193 $1 million in total assets.
And 51.0 dollars in debt.
<unk> 47 $5 million in stockholders equity.
$65 5 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.
Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time.
We asked but wild closing your question you pick up your handset if listening on speaker phone to provide optimum sound quality.
Please hold while we poll for questions.
Your first question is coming from Brian Kinks lineup of Alliance Global Partners. Sir. Please proceed with your question.
Great. Thanks, so much for taking my questions.
So your revenue was about $6 million higher than you had originally guided to which was fantastic.
I was just not enough to offset any of the $800000 change that you mentioned you accounted for and how you the gains.
That you mentioned in your press release to hit your $2 million EBITDA guidance I guess Im just wondering why did the pressure sorry.
Mistake did the pressure related to supply chain get worse, just trying to understand the outperformance on the top line that didn't help the bottom line.
Of that jumbo and made sense.
Yes.
Brian This is Pat that makes sense. So yes in Q1, we did see margin under pressure and it improves Bon ton. We reached the end of the quarter the January and February .
We were seeing the net impacts of the inventory.
In most sectors.
Fuel increases that is also being kind of continued and further delays as we've seen with lockdowns in China and freight and shipping costs have actually increased again, so we are seeing that pressure coming through and through our margin.
But in order to make your appropriate return everything is increasing are you not able to increase pricing at all I mean.
It seems that the revenue generating you should generate a little bit more profit, yes, absolutely. Brian . So we are doing that so one of the key things, though is we have increased pricing as we move forward, but some of the orders that we were delivering were pre committed on previous pricing. So that's why as they were released and sold into the market through Q1.
Previously committed to prices on orders. So again, we will see that improvement through the margin as we progress through 2002.
Okay and then in.
In regards to the delays you talked about in the second quarter.
I've got a $10 million if my estimate is the one I'm looking at.
So where is that coming from the U S as in EMEA.
A few customers is that many customers and then what led to these delays.
Yes slightly higher.
Yeah.
Okay.
Yes, so basically we have Brian in the supply chain.
Sure.
<unk> manufactures in China, so sourcing.
The components and actually getting them shipped with the Lockdowns that has been kind of a manufacturing delay. So thats what will actually impact. The Q2 is actually the receipt of the goods to be able to fulfill the orders. So it will be one of timing.
That it will actually kind of slip from Q2 into early Q3 for some of those orders and it will be kind of generally in many markets because it's just the delay in production and supply.
Totally makes sense. So I guess my question would be why are you comfortable still with $250 million I assume that's going to back things up and Youll get some orders pushed from <unk> to <unk>. Some orders pushed from <unk> to <unk> and then some.
You're assuming some orders out of <unk>. So.
I guess I'm just trying to understand.
So it should be hopefully a short term timing thing you'll be seeing that as we all know the lockdowns in terms of China currently.
Impacted factory production, but also shipments where ports have been closed so.
That has a knock on effect of the products that would land ordinarily and timely basis in Q2 and through Q2, so as they resolve outs, we should see that normalize beyond.
Last question.
In terms of the revenue guidance.
The September quarter is usually seasonally strong I believe it's jumped up and down depending on when the orders get pushed but I mean.
Should we assume next 40% of the revenue guidance this year.
Okay.
Yes, so I mean look yes.
Yes, so Brian Michael we havent guided to that quarter, specifically, but yes, I think if you look historically, it's definitely north of 30% of total revenue. There is some shifting as we talked about from Q2 to Q3, so it very well could be could be closer to that figure, but but our hotel.
Yes.
Yes.
But you can't tell at this point that's right.
Okay. Thanks, guys.
Thanks, Brian Thank you.
Okay.
Thank you. Your next question is coming from Jack Vander Ark.
At Maxim Group, Sir please pose your question.
Okay, great. Thank you.
Good afternoon guys.
Appreciate the update thanks for taking my question.
I just got the press release pulled up in front of me. So I have a few housekeeping things.
With me.
I'm quoting these incorrectly I think I heard that the first quarter gross margin was 24, 9% and adjusted.
For acquisition accounting with 27, 4%.
First is that correct.
Second is that gross margin also adjusted for the higher freight and shipping costs or is that a third layer.
That would be sorry, hi.
Attractive.
So the FTE roughly right.
The margins as you can see in the press release 24, 9% and the effect of the purchase accounting.
Is two fold one we have obviously the deferred revenue adjustments, which you can see on the adjusted EBITDA calculation and also the fair market value of the inventory markup from the recent frontline acquisition. So as adjusted for those normalized at 27, 4% and then yet further impacted that would have been higher on both counts.
Adjusted and post adjusted for the increased freight and transportation costs, which we are still incurring and will continue to see that occur.
But as I said, the Michigan, so that going forward to both revenue increasing from pricing and then secondly efficiency and better sourcing pricing.
So we will see our margins increase.
Okay, and then just just a follow up to that though.
You mentioned, you're expecting gross margins to improve throughout the year and beginning in the second quarter as well.
For clarity.
The <unk> acquisition, which.
We closed and that adjustment of 24% margin for acquisition accounting that is no longer going to be.
And the mix then right starting in the second quarter, but youll still how we should think yes, it will be actually.
Carry on through 2022 and then it will be.
Fully amortized through this year, so that will continue through this year.
Okay understood.
And then.
I think I heard $64 million of customer orders in the first quarter with the bulk from the U S and then EMEA.
So the U S orders, just curious back back when before the acquisition of the era.
<unk> was always heavily tied in nerd narrated around classrooms.
And school districts in the U S.
Just wondering for those U S orders.
Much of this is related to existing school district in classroom customers refresh cycle.
Are you getting additional traction by penetrating new school districts in the U S.
Yes.
I would say sorry, it's mark here.
I would say the majority is new.
New class rigs, we obviously do get repeat business.
But the majority of it is out there.
Talking and getting new customers.
But it's predominantly.
It's the last districts, where we can win some significant orders that really bumped up and Thats why youre seeing such growth in those order numbers and thats.
Why we're still comfortable with hitting the $250 million for the year.
Yes.
New districts were bringing on.
The vast majority of refreshes of old technology, So it's not they're not going from zero, they're typically refreshing after an interactive whiteboards or are there other old technology and were conditional schools to utilize our interactive flat panel displays and other solutions as part of that replacement.
Got it okay, and Michael just to that point.
So.
It's somewhat abated.
It's a nice fit into this refresh cycle is opening up the opportunity for you to kind of take out.
When they get involved is that refresh cycle I think in the past.
I'm sure it varies but like a five to seven year refresh cycle is that still kind of the cadence in the U S for class III Brexit and does that mean, you're most of the new orders are from new customers.
Are you expecting a big demand third.
Yes.
Cost guidance per year that are approaching that refresh upgrade.
Yes. So the answer is yes that five to seven year timeframe is still a good estimate of windows refreshes would happen.
Keep in mind that the majority of the panels that we're installing have a five year warranty, but in some cases, we've gone as long as seven years on the warranty.
And.
And then your follow up question there on refreshes that yes, we're going to start to see more and more of that keep in mind. The majority of our sales because of our dramatic growth. We've had the last couple of years, we have very few customers that we spend back five plus years, but we are expecting to start seeing some of that and we have had a couple of districts, where we did.
About five years ago install and we are seeing some some repeat business on refreshes, we're starting to see some of that now, but I think youre going to see that a much more dramatic way over the next couple of years.
Because of our growth cycle.
Okay, Great. That's helpful. And then maybe just one more follow up for me on kind of Opex run rate just given front row. So theres a lot of things involved here that are kind of more.
Nonrecurring or onetime in nature. So if I look at the Opex total Opex G&A is the biggest line item here.
Is this.
I don't know if you have a sense of the seasonality and what a normalized kind of opex level is now.
Because they can settle then what are we thinking like on a go forward quarterly basis now for Opex is this is this above what you think or I don't know any.
Any help there would be appreciate it yes.
That's going to be pretty normal because that's including obviously the.
The amortization of intangibles related also to the acquisitions.
Continuing so yeah, that's that's pretty normal.
Okay. So this is a good steady kind of base to work.
Alright, good indicator for your basis yet.
Okay Cool and then just maybe one more.
If I heard it mentioned.
<unk>.
The Samsung bundle collaboration effort.
Yes.
Is it.
Yes.
Are we moving to changed on this is this still a growth driver is there any.
Stats you can provide on number of licenses sold or is this is just not the focus.
Update there would be helpful.
Yes, so our main focus with our Samsung partnership is on providing our software licenses than purchasing our <unk> connect licenses.
Which they would they are then partnering with their interactive flat panel displays.
And we are getting traction there they committed you'll remember last year, we announced that they committed $1 million.
Licenses that you purchased and we expect them to purchase more license this year.
We focus less on the distribution side of the business we can distribute.
Samsung displays, but we're primarily focusing on our in house displays and so we're seeing less traction there and although we still are offering.
Our bundle of Samsung Chromebooks with our software and training that's gained a little bit less traction in recent months and I think thats a function of there is a large amount of competition with that and so we focus a little less than that as well so as far as the Samsung partnership what you have to see as far as traction over the next few months is going to be.
Providing our software licenses of menial connect that are bundled with the Samsung displays.
Okay.
Okay great.
That's it for me I appreciate the color guys I'll hop back in queue.
Thanks Jack.
Thank you.
Thank you if there would be any final questions or comments. Please press star one on your phone.
First there are no questions in the queue. So I'll hand, it back to management for final comments.
Thank you everyone for your support and for joining US today on the first quarter of 2022 conference call. We look forward to speaking to you again in August when we report our Q2 2022 results. Thank you.
Okay.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.