Q3 2022 Boxlight Corp Earnings Call
Ladies and gentlemen, please remain on the line you call will be starting in the next few moments. Please remain on the line you call will be starting in the next few moments.
[music].
Thank you and welcome to the box late third quarter 2022 earnings conference call by now everyone should have access to the press release issued this afternoon.
Call 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.
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 that may cause the actual results to differ materially from the forward looking statements.
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 analytical tools to understand the company's operations. The company has provided reconciliations to the most directly comparable GAAP financial measures in the earning press release, which will be posted on the <unk>.
Buster relations section of the company's website at bauxite dotcom.
And with that I'll hand, the call over to box, Chairman and Chief Executive Officer, Michael Pope.
Hello, everyone and thank you for joining also on the call are Mark <unk>, our president and Greg Wiggins, Our Chief Financial Officer, Mark is joining us from London, and Greg and I are joining from our corporate office here in Atlanta.
The third quarter was our strongest to date with $69 million in revenue and $10 million and adjusted EBITDA.
Revenue grew by 13% and adjusted EBITDA by 38% over the same quarter last year.
We have delivered double digit or greater revenue growth for eight consecutive quarters and continued to gain meaningful market share globally.
Recent movements in foreign exchange rates have impacted our financial results specifically the weakening of the pound and the euro against the U S dollar and foreign exchange rates had held constant during the quarter, we would have reported greater than our guidance of $70 million in revenue and $10 million and adjusted EBITDA.
Our gross profit margin for the third quarter improved to a record 31% a dramatic increase over our Q1 gross margin of 25% in Q2 gross margin of 28%.
The improvement was largely a result of additional decreases in supply chain and logistics costs, we expect gross profit margin greater than 30% for the fourth quarter.
For both the three and nine months ended September 30 for the first time as a company we generated positive cash flows from operations. We also ended the quarter with an improved balance sheet, including $22 million in cash $49 million in inventory and $62 million and working capital.
Our debt balance as of September 30th was $59 $2 million. However, subsequent to quarter end, we made a principal payment of $4 to $5 million, reducing our current debt balance to $55 million.
We are expecting only modest growth in the fourth quarter and have revised our guidance to $48 million in revenue and $2 million and adjusted EBITDA, resulting in our full year guidance of 2200 $27 million in revenue and $18 million and adjusted EBITDA.
Our full year guidance represents revenue growth of 23% and adjusted EBITDA growth of 49% over the full year 2021.
Although we have experienced slowing demand in recent months, we still expect to deliver double digit revenue growth in 2023 and significant improvement to our gross profit and adjusted EBITDA margins.
We are a global company with offices across the United States, Western Europe , Canada, and Australia. Today, we have nearly 300 employees are full time contractors, including over 100 individuals in our sales organization that manage hundreds of channel partners with thousands of sales representatives across the globe.
We also have over 100 employees are full time contractors in our R&D professional development and customer service teams.
That develop deliver and support our complete lineup of hardware software and service solutions.
Earlier this year, we introduced our new generation interactive flat panels and sizes ranging from 55 inches to 98 inches under our brands clever touch in Mineola.
Our current touch screens had been our most successful solution to date with upgraded hardware and software, including Android 11 upgraded speakers USB C inputs with hardware optimization multi user profiles and launch screens are clever software portfolio and compatibility with Google classroom and cloud accounts.
During the third quarter, we launched our all in one video walls with sizes ranging from 120 inches to 220 inches. We also introduced our clever hub wireless presentation system with built in digital signage capability and touch screen functionality designed for video conferences meeting rooms classrooms and training room.
<unk>.
Our interactive and non interactive displays video walls and media players all come enabled with our clever software assets clever store clever share and clever lives clever stores are cloud based app store with hundreds of vetted applications clever shares our collaboration tool, providing enhanced screen sharing and screen.
Casting functionality and clever alive is our digital signage software platform, enabling the creation deployment and management of content across multiple displays in any location and the ability to send out alert and messages integrated with our front row audio solution for campus communication.
During the quarter, we also put significant updates to our education platforms links whiteboard and Nino connect linked right board as a cloud based software tool that provides for white boarding less complaint creation and delivery and student collaboration across multiple platforms and devices. It is available free of cost per download on every major app store.
Day, we have nearly 200000 registered users and 25000 monthly active users on Mike's whiteboard that are engaging with over 100000 monthly sessions.
Our mimeo connect blended learning platform is the most feature rich solution on the market for virtual and hybrid learning during the quarter. We added several additional features including the ability for students to add and see their own annotations and notes to instructor lessons feature functionality W. Student work lives as well as share of students.
Work screens or notes to the front of the class display student polling via text messages and enhance stem lessons with fat math and science simulations.
During the quarter, we launched our first pilot of Mindy will connect with a large school district, and we expect meaningful monetization of the platform with several with several school districts beginning next year.
In December of last year, we announced the acquisition of front row, adding robust audio on campus communication tools to our product line, we continue to integrate front row solutions into a broader solution suite and have since introduced our integrated AG campus communication system under the brand attention.
Attention enables announcements bells and alerts can be delivered as both audio and video simultaneously across the school.
This new integration makes communicating in school campuses significantly easier, including emergency communications.
We continue to receive recognition for our solutions and during the third quarter. We earned 11 best for back to School 2022 Awards from Tech and learning. The solutions awarded include Mimeo Pro for clever lives Mimeo connect my stem Kids U S education and attention by front row.
With that I will now turn the time over to our President Mark Starkey.
Thank you Michael.
Despite strong inflationary headwinds record drops in the value of the euro and Sterling and recession fears across EMEA, we still managed to achieve a record quarter for both revenue and profit in Q3.
<unk> I must thank our employees, our customers and our investors as this performance would not be impossible without that continues to call.
As Mark stated earlier, we booked $44 million of orders in the quarter, which is down 14% with Q3 last year.
However, on a year to date basis, the value of orders booked for the first nine months of this year.
$91 million.
Compared with $179 million booked in the first nine months of the previous year.
Representing 7% year on year growth.
On a local currency basis, the growth rate is much higher.
<unk> business has been impacted by the significant devaluation of both euro and Sterling.
We are now forecasting more than $220 million order intake for this financial year.
Our largest customer in Q3 in terms of order intake was blue in the U S with $5 $9 million of orders received.
Our organic growth in the U S has been very significant.
We anticipate more than 130% growth in gross profit for the full year in the U S.
In terms of other key customers in Q3, we received $2 $2 million of orders from camera Monday, a partner in Costa Rica.
$2 $1 million from graphics distribution of U S distribution partner.
$6 million from Central technologies in Tennessee.
$1 $4 million with unites distributed.
Fischoff AG in Switzerland, with our largest customer in EMEA, placing $1 $5 billion of orders in the quarter.
We received $1 $4 billion of orders when you go to T K, Denmark of $1 1 million Latinos in the U K to name a few.
Overall, the U S accounted for 44% of our orders booked during Q3.
With a U K accounted for 26% Europe , excluding the UK accounting for 24% on the rest of the world 6%.
In Q3, 67% of our revenues came from sales of interactive flat panels, both myriad and clever touch with our front row audio solution accounting for 8% of revenues, 14% gross profit.
Our market share of IP deals in the U S increased from five 3% in Q1 to eight 4% in Q3. According to the latest report from future source.
Our market share in Europe was similar and increased from five 6% in Q1 to six 6% in Q3.
We remain in the top two <unk> providers in the U K with 14, 4% market share.
We continue to be the top two brands for market share in Ireland, Australia, Austria, Sweden.
And Denmark, Belgium, Switzerland, and South Africa.
Our biggest opportunity for significant growth remains in the U S. While we are ranked number five with an average market share of six 6% and Germany. While we are ranked number seven with 4% market share.
In terms of market size the U S market for <unk> estimated to be worth $2 2 billion in 2022, according to future source.
The market in EMEA slightly smaller and estimated to be worth $2 billion.
Overall this gives us an addressable iapt opportunity in our two key markets of about $4 2 billion.
Given that we have single digit market share. We believe we have plenty of room for substantial organic growth over the next few years.
In terms of end users, we had another quarter of great wins across the globe in Puerto Rico, We received orders for more than 2000, <unk> protocol screens to be supplied to schools right across the territory.
And we expect to win another 3000 screens in the imminent future, both interactive and non instructive solutions.
We also won a tender to provide more than 500 mimeo protocols screens.
Arthur Texas.
This solution included the rollout of professional development to help US go district implement the technology.
In Germany, we had a fantastic tend to win this wood door with a minimum requirement of 668 86 inch impact lock screens, but with potential for over 1000 screens to be supplied over the next two years.
In Switzerland, we want a project to supply 658 to six inch clever touch screens to the canton of casino.
They selected our <unk> solution against the competition based on the best product features.
These are just a handful of the many projects that we won in Q3.
We continue to grow our corporate teams in both EMEA and the U S and developed solutions to the problems that many enterprises are having as they adapt to the new hybrid world working both remotely and in offices.
In summary, Q3 was an outstanding quarter with record revenues and profitability we.
We believe we are well positioned to weather any potential downturn in market conditions due to our strong mix of K 12 business mix with corporate in higher education solutions.
Our focus remains on growing our business.
<unk> and sustainable way by increasing our market share in our key territories that we operate.
With that I will now turn the call over to our CFO Gregg Wiggins.
Thanks, Mark and good afternoon, everyone I will now review our third quarter results.
Revenues for the three months ended September 32022 were $68 7 million as compared to $61 million for the three months ended September 32021, resulting in a 12, 7% increase primarily due to the inclusion of front row and increased demand for our <unk>.
<unk> in the U S.
Front row revenues for the three months ended September 32022 totaled $5 6 million or approximately 8% of our total revenues.
As previously mentioned.
Next headwinds significantly impacted operating revenues for Q3 2022 on.
On a constant currency basis operating revenues increased 22% for the three months ended September 32022.
Taking a closer look at Q3 2022 revenues EMEA revenues totaled $25 1 million or 36% of our total revenues America's revenues totaled $43 1 million or 63% of our total revenues while revenues from other markets totaled <unk> $6 million or 1% of our.
Total revenues are.
Our top 10 customers represented approximately 34% of total sales in Q3 with the single largest customer at approximately 17%.
And our based across a number of markets, namely the U S U K, Puerto Rico and other European countries.
Approximately 42% of total sales are covered by the top 20 customers.
In Q3, 2022 hardware comprised the largest proportion of total revenues at approximately 96% of which approximately 69% related to our flat panel displays with the balance related to classroom audio solutions and device accessories. The balance of our total revenues are comprised of software.
Additional services and stem solutions.
Gross profit for the three months ended September 32022 was $21 million as compared to $15 8 million for the three months ended September 32021.
Gross profit margin for the three months ended September 32022 was 36%, which is an increase of 470 basis points over the comparable three months in 2021.
Gross profit margin adjusted for the net effect of acquisition related purchase accounting.
It was 31, 6% as compared to 27, 1% as adjusted for the three months ended September 32021.
The improvement in gross profit margin in Q3 2022 compared to Q3 2021 is primarily due to higher margins associated with front row products lower manufacturing cost and continued reductions in certain freight cost.
Total operating expenses for the three months ended September 32022, or $14 6 million as compared to $12 3 million for the three months ended September 32021 the.
The increase primarily resulted from additional overhead costs associated with the acquired front row operations, including related intangibles amortization and employee related expenses to support the growth of our U S and EMEA operations excluding.
Excluding front row operating expenses decreased by <unk> 5 million to $11 8 million.
Other expense for the three months ended September 32022 was a net expense of $2 8 million as compared to net expense of $1 4 million for the three months ended September 32021. The increase was primarily due to an increase in interest expense of $1 7 million associated with increased <unk>.
<unk> related to our credit facility changes in derivative liabilities of 113000 and increases in other expenses of 128000, partially offset by a decrease in gain on settlement of debt of 600000 from the prior year period.
The company reported net income of $3 1 million for the three months ended September 32022, as compared to net income of 729000 for the three months ended September 32021.
Net loss attributable to common shareholders was $2 8 million and 412000 for the three months ended September 32022, and 2021, respectively. After deducting the fixed dividends to series B preferred shareholders of 317000 in both 2022 and 2021.
Total comprehensive loss was $1 9 million and $1 3 million for the three months ended September 32022, and 2021, respectively, reflecting the effect of foreign currency translation adjustments on consolidation with the net effect in the quarter of $5 million loss and $2 million loss for the three months ended September .
<unk> 2022, and 2021, respectively.
Earnings per share per basic and diluted share for the three months ended September 32022 was <unk> and <unk>, respectively, compared to EPS per basic and diluted share of <unk> for the three months ended September 32021.
EBITDA for the three months ended September 32022 was $8 5 million as compared to $4 7 million EBITDA for the three months ended September 32021.
Adjusted EBITDA for the three months ended September 32022 was $9 9 million as compared to $7 2 million for the three months ended September 32021 adjustments.
Adjustments to EBITDA include stock based compensation expense gains losses from the re measurement of derivative liabilities gains losses recognized upon the settlement of certain debt instruments and the effects of purchase accounting adjustments in connection with recent acquisitions.
Now turning to our results for the year to date period revenues for the nine months ended September 32022 were $179 million as compared to $141 2 million for the nine months ended September 32021.
The resulting in a 26, 8% increase due primarily to the acquisition of front row in December 2021, and increased demand for our solutions across all markets.
On a constant currency basis operating revenues increased 34% for the nine months ended September 32022, compared to the nine months ended September 32021.
Gross profit for the nine months ended September 32022 was $50 5 million as compared to $37 2 million for the nine months ended September 32021.
The gross profit margin was 28, 2% for the nine months ended September 32022, compared to 26, 3% for the nine months ended September 32021.
Gross profit margin adjusted for the net effect of acquisition related purchase accounting was 30% for the nine months ended September 32022, as compared to 28% as adjusted for the nine months ended September 32021.
Total operating expenses for the nine months ended September 32022 were $46 6 million as compared to $34 2 million.
For the nine months ended September 32021.
The increase primarily resulted from additional overhead costs associated with the acquired front row operations in December 2021, including related intangibles amortization and employee related expense expenses to support the growth of our U S and EMEA operations.
Other expense for the nine months ended September 32022 decreased approximately zero point $6 million to net expense of $5 1 million as compared to net expense of $5 8 million for the nine months ended September 32021.
The decrease was primarily due to a gain of <unk> 9 million recognized upon the settlement of certain debt obligations in 2022 compared to a loss of $3 million recognized upon the settlement of certain debt obligations in 2021, and a $1 7 million decrease in the fair value of derivative liabilities, partially offset by an increase in inter.
Just expense of $4 7 million associated with increased borrowings under our credit facility the.
The company reported a net loss of $2 7 million for the nine months ended September 32022, as compared to a net loss of $7 2 million for the nine months ended September 32021.
The net loss attributable to common shareholders was $2 7 million and $7 2 million for the nine months ended September 32022, and 2021, respectively. After deducting fixed dividends two series D preferred shareholders of 952000 in each period and the fair value revaluation deemed contribution of 300.
67000, following the redemption amendment with the series D shareholders. During the nine months ended September 32021.
Total comprehensive loss was $13 2 million and $8 4 million for the nine months ended September 32022, and 2021, respectively, reflecting the effect of cumulative foreign currency translation adjustments on consolidation with the net effect year to date of $11 4 million loss and $1 7 million loss for the <unk>.
Nine months ended September 32022, and 2021, respectively.
The earnings per share loss per basic and diluted share for the nine months ended September 32022 was fortunate compared to a loss of 12 cents per basic and diluted share for the nine months ended September 32021.
EBITDA for the nine months ended September 32022 was $12 9 million as compared to $5 2 million of EBITDA for the nine months ended September 32021.
Adjusted EBITDA for the nine months ended September 32022 was $16 3 million as compared to $14 1 million for the nine months ended September 32021.
Now turning to the balance sheet at September 32022 box light at $22 million in cash <unk>.
$62 3 million and working capital $49 4 million in inventory $214 5 million in total assets $59 2 million in debt and $46 8 million in stockholders equity at September 32022, bauxite had $74 1 million common shares issued and outstanding and three.
1 million preferred shares issued in outstanding.
With that we'll open up the call for questions.
Certainly the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time.
So while posing your question. Please pickup your handset up listing on a speaker phone to provide optimum sound quality. Please hold on just a moment, while we poll for questions.
Your first question is coming from Brian Klein.
Lyons Copal partners. Please pose your question your line is live.
Okay, great. Thanks, guys nice third quarter.
I wanted to start by understanding the factors that was driving the reduction in the revenue and EBITDA guidance, how much ways change in demand versus changing that back and then on the demand side was it all Europe or was it also the U S and if you could maybe delineate.
Okay.
Mark would you want to start with that one.
Yeah, I can start with that yes. So.
Yeah. So so.
Q Q3 came in about just barely short of where we expected that that that can be explained by FX.
FX.
It passed if foreign exchange rates and how constant we would've came in north of where we expected for Q3, but Q4, you're right. We did reduce our guidance for Q4, I don't know if that reduction and we came up with Greg about half of that or so that it can be explained by FX, that's right and about half of that I would say is a slowing of.
Demand that we're seeing right now, which we think may be temporary, but we're seeing a little bit of a slowing of demand that's coming in via custom orders.
And you've got the U S is that Europe , where are you seeing.
The board well, so kind of all your question.
Wrote a little bit across the board I mean FX. Clearly is is is in Europe . Yeah. Go ahead, Mark if you want to jump in.
Yeah, because I think that the actual number of being from Q3 and Q4.
When we were guiding to 50, it was 10 million on FX and then the balance of the Dallas was $13 million, which was both across EMEA and the U S probably more in EMEA and the U S.
And is probably you know we know there's still a lot of problems in the U S, which is kind of why are we still in a more confident that it could be a temporary slowdown because we know there's a lot still to be spent in the U S.
And then as we look to next year I think the future source.
I'll revise gossamer estimates and so.
Maybe the market it'll be down given certain spending you've been really successful in gaining shares since the two companies and two brands will emerge.
How do you think about next year your ability to grow if the market does in fact decline and what gives you confidence that you can continue to grow in that market. If that is the case.
So a couple of thoughts and then marching pretty jump in so first drop as Mark mentioned, we're still a small percentage of the total market. So sure future sources showing that growth in interactive flat screens as is slowing and actually declining a little bit perhaps in certain markets, but because we're still a.
Small piece of the total market. We're confident we can continue to take market share, which is most of our revenues today are from us taking market share from some of our key competitors as these technologies refresh. So when we're looking out to next year, we're still very confident in double digit revenue growth next year, perhaps not quite as confident as we had been.
Before a bit of a slowdown, but still we're confident we're going to take market share and I would add on top of taking market share with some of our historical technologies and solutions have been telling also we've launched several new solutions and we believe that those can contribute in a meaningful way starting next year to our revenue that will also make up some of the difference is.
If there continues to be a little bit of slowing of demand.
Two more questions. The first one sorry.
Yes. Please.
They also want to touch it very very quickly I think.
We've got great products and I think if we go head to head with our competitors on the shoe out very often were wins. So we never got great products and our sales team. We got a great sales team and that is growing right is more.
Focus on building that sales team.
In the U S and EMEA so.
It is now about taking market share. So if we can take market share we know we're going Greg.
Okay like I said two more questions. The first one is.
<unk>.
Maybe you can talk about I think you mentioned this in one of them one of your answers to my questions. What's left in terms of stimulus spend or education, I guess I'm, a little surprised U S is down if there is still lots more fun, but maybe we'd eaten through a lot of that maybe maybe take us through where we are with that.
Yes.
Yes. So there were stimulus packages that were passed across the globe. We've talked about in the past that of course, the largest was in the U S.
In the U S. There were really three stimulus packages that were that were passed starting with the cares Act and then and then and that was in March of 2020, and then of course, the largest happened in 2021 with the bite enacted he passed but in total those were $191 billion in the U S that we're applying to education.
191 billion. The last stimulus package was 123 billion or are we talking about essar three rights of ASUR bonds. One two and three is for three was 123 billion. The vast majority has not been spent in fact I just got a report.
Earlier this week of a group that tracks they serve a school districts across the country hundreds of them and they came back with very low double digit like in the teens percentage of what has been spent about 123 billion. So I am a bit surprised actually by the future source results that show a slowing in 2023 and 2024.
Because there still is a lot of money to be spent I'm not surprised we're seeing a little bit of a low now because school districts hurried up and bought a bunch of solutions as you know as they got back to in person learning and they had this additional money they went out and they bought devices mobile interactive screens in other technologies and I think part of the low now it's just a result.
When you buy a whole bunch, you know, having a little bit of a breather, but but I will say you know whether future source of accurate or not they're absolutely is tremendous amounts of money still available to be spent in the U S. In particular and this federal stimulus money and we are actively going after school districts that be part of that solution and in fact, we've talked about.
In the past in addition to us marketing to them to sell our solutions, which qualify for that that federal money. We also have an in house Grant rider and we have consultants in house that help school districts to apply for that money and help plan to spend that money and responsible ways.
Great that is super helpful last question I'm going to sneak it in and that's all I've got is.
If you can touch on the pricing environment.
Are your competitors getting more and more.
More aggressive given your gaining share and door to a potential weaker market and then help us on the gross margin that puts and takes with what we're hearing from some other companies I cover that are talking about shipping container rates back to pre COVID-19 levels. So.
Those are the puts and takes maybe talk about both of them and how you think about gross margin going forward.
Yes, so a couple of things one you've seen our gross profit improvement in Q3, we came in at 31%. You'll remember Q1, we were 25% Q3, 28% and they'll also be guided to Q4, we expect to be north of 30% and I would say going into next year. We think we can hold that north of 30 <unk>.
<unk> gross profit margin for some time, we are benefiting right now have higher margins on interactive displays, which we know we won't move onto forever. There definitely is going to be more competition on pricing, but right now we've held our pricing high we've had minimal discounting that's true across across the globe, Yes, we benefited.
From lower costing both on buying our solutions, but then also as you mentioned freight you talked specifically or made a comment on on container.
And you probably heard from other companies those were back down to single digit and we've seen those even as low as five to $6000 coming to the west coast and that is a dramatic reduction from the height of well over $20000 a container when we were shipping from China. So we definitely see transportation costs come down again buying as the cost of buying our solutions have come.
Down, but we've held those prices high.
And I think again will benefit from these higher gross profit margins even on panels, we think through 2023, but we'll start to see some pressure at some time in the near future with our competitors dropping prices and our strategy is to be able to sell our other solutions around the panel not just to be panel dependent we expect to sell our software solution.
Our our stem solutions, our accessories, including audio among others and that is what's going to help us to maintain high gross profit margins when youre looking out and a 135 years into the future.
Great. Thank you so much.
Thanks, Brian .
Your next question is coming from Jack Vander <unk> with Maxim Group. Please pose your question your line is live.
Okay great.
I appreciate the update guys. Thanks for taking my questions.
Michael Great to see the record gross margin and the positive GAAP EPS result, despite the FX impact.
I noticed that G&A opex.
Ticked down quite a bit this quarter.
Is this also FX related or did you guys make some structural cost cuts or reductions.
Yes. So it was not it was not specifically ethics related it was a combination of a handful of things, but we have had some reductions in our cost in certain areas.
And some of those are synergies of bringing some of the acquired companies that we brought in in recent years, including front row December 31 of last year.
We have had some reduction some costs.
As part of gaining efficiencies across the organization some of those cost reductions were offset by increasing our sales team, which we've we've added some strategic hires we added several additional sales reps in Germany for example.
Bolstered our enterprise senior in the U S. Among other areas, but but I would say, yes across the board we have had some cost reductions.
And the Opex that you see for Q3 that should be indicative of what you should expect going into Q4 and at least beginning of next year.
Okay, Great that's really helpful color.
And then and then also it sounds like gross margin do you expect to remain strong next year as well so that's good.
Maybe just a quick housekeeping question that you normally provide ending back orders I didn't catch it in the press release do you have that number on hand.
Yes. So back orders are currently around $20 million the end of Q3.
Okay got you.
Yes Jackie.
We didn't add it to the end I think we are still trying to reconcile a couple of numbers. When we went through that reconciliation. We didn't we likely will add that back next quarter and put that in the press release and in the.
Our talk track.
No.
Okay.
Obviously, it's a tough economic environment, we're seeing it from everywhere.
I think you know the customer orders decreased for the first time in quite some time.
But just given your positive outlook expectations for I think you said double digit revenue growth in 2023, and you expect improved margins did you say did you say you expect improved profitability as well or I don't know any indication on the profitability and cash flow line for 2023.
Yeah. So we haven't provided specific guidance to that but I think you could arrive at an estimation and you could do that by you know I think you know double digit revenue growth next year. It is our expectation now that's going to be on the lower side, considering the current environment, but but but but you can you can tack on double digit revenue growth.
And then also gross profit margins because they've improved we're expecting that to continue into next year and so if you tack on 30% or greater gross profit margin in next year and then as we mentioned operating expenses it should be relatively flat, yeah, youre going to see substantial improve profitability and that ought to be.
Absolutely north of 10% adjusted EBITDA, but were.
But where you are.
Our 10% adjusted EBITDA margin, but we haven't guided to a specific number.
Okay, Great and then maybe just one more question from me since we're coming up on the anniversary of the front row acquisition.
I think it's I see you did $5 6 million of revenue this quarter.
That was the business that was front row performed relative to your expectations.
At the time of the acquisition and then has his front.
Recently also experienced a similar decline in customer order demand.
How do you expect that business to look next year.
Yes, so the demand for <unk> for front row solutions that actually declined by more than the rest of our business and I think that was a result of post COVID-19 a lot of school districts went out and they bought audio solutions and I think there's a bit of a lull now because a lot of the audio demand was gobbled up pretty quickly.
<unk> and <unk> and we're kind of in this low period, but that being said our outlook is very positive when youre looking out the next several years and Theres a couple of reasons for that no. One we're still working with our broader partner network to sell audio and a lot of those partners had not so why do you in the past, there's a lot of opportunity there and that's across the U.
In Europe and globally.
Also most of the sales from front row, the vast majority of well over 90% have been in the U S and we see an opportunity to sell front row more globally and weeks and we'll start to see that happen. But then also we talked about more recently that we've added more and more integrations of the front row audio solutions that campus communication solutions into our broader solution suite.
Specifically, our interactive flat panels and displays.
As well as our new media hub, among others and and that those integrations. We believe are going to result in us being here.
Able to broaden the market demand for that that combined solution or that integrated solution and so that story is resonating quite well out in the channel and we expected to see growth and also if you look at our largest competitor in the audio space, there well over double our size and Theyre in audio.
Only company and so we're quite confident that we can start to take market share from that competitor among others and so again, if youre looking into next year, we definitely going to see growth as well as into the future.
Future years.
Great. That's helpful color and I actually I have one more question just back to your comments Michael in the prepared remarks, you mentioned something about I think a debt repayment.
Secret to quarter end can you just review that again with me.
Yeah happy to yeah. So we per our loan agreement with White Hot we had an $8 5 million dollar figure that was repaid by February of next year end of February . So we are early paid half of that $8 million or.
Our eight 5 million. So we paid for in a quarter million, we made that payment last week and we made an early because we had excess cash on the balance sheet and we figured we'd save some interest and so the additional four in a quarter of million payment, we'll make honoured before February but likely by the end of this year, we will make that additional payment again in an effort to save some.
And note that you know as I mentioned in our earlier messages and you can see on our financial statements and we generated positive cash flow from operations, both for the third quarter and for the for the nine months ended September 30, and so we are generating positive cash flow, we expect that to happen going into the future and we're going to be in a position to be able to continue to pay down debt.
Needed or have cash or other initiatives.
Okay excellent I appreciate the color there that's good news to hear I'll hop back in the queue. Thanks.
Thanks Jack.
There appear no further questions in queue at this time I would now like to turn the floor back over to Michael Pope for any closing remarks.
Great well. Thank you everyone for your support and for joining US today on our third quarter 2022 conference call. We look forward to speaking to you again in March when we report our 2022 full year results.
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.