Q3 2022 Siyata Mobile Inc Earnings Call
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Good morning, ladies and gentlemen, and welcome to the <unk> Mobile Q3 conference call.
At this time all lines are in a listen only mode.
Following the presentation, we will conduct a question and answer session.
If at any time during this call you require immediate assistance. Please press star zero for the operator.
This call is being recorded on Friday November 11 2022.
I would now like to turn the conference over to Daniel Kim.
Vice President of corporate development. Please go ahead.
Thank you for joining.
Joining the Seattle mobile third quarter 2022 conference call.
Today, I'm joined by our CEO , Mark <unk>, and our VP of international sales Glenn Kennedy.
We will all be available for questions at the end of the presentation.
During the course of this call manage will make expressed and implied forward looking statements within the private Securities Litigation Reform Act of 1095, and other U S Federal Securities laws.
These forward looking statements include but are not limited to.
Those statements regarding future product offerings the.
The belief that we are on the path for strong organic growth.
The goal to deliver strong year over year revenue growth and reached profitability in the coming quarters.
The belief that the worst of the pandemic is behind us and that we will continue to see strong sales in all of our product lines and across our various markets.
And the timing and scale of our rugged handsets did north American and international carriers.
Such forward looking statements are based on the company's current expectations and assumptions regarding its business the economy and other future conditions.
Because forward looking statements relate to the future. They are not statements of historical fact and are subject to inherent uncertainties risks and changes in circumstances that are difficult to predict.
The Companys actual results may differ materially from those contemplated by the forward looking statements.
We caution you therefore against relying on any of these forward looking statements.
The company cannot guarantee future results levels of activity performance or achievements. The forward looking statements contained in this presentation are subject to other risks and uncertainties, including those discussed in the risk factors section and elsewhere in the Companys annual report on form 20-F for the year ended December 31, 2021 filed with the Securities and exchange.
Range Commission.
Now I'd like to turn the call over to Mark.
Thank you Daniel.
Good morning, and thank you for joining the call.
Very pleased to report strong year over year, and sequential topline growth and declining losses in the third quarter of 2022. This improved fundamental performance was driven primarily by a number of customer trials of our SD <unk>.
<unk> push to talk handset device.
Shipping in Q2 2022, many of which then converted into purchase orders with volumes in Q3 that increased over Q2, we hope to deliver continued sales growth from this current quarter Q4 and onwards.
I'll discuss our financial results for the third quarter ended September 32022.
My remarks, with our outlook revenues for the three months ended September 32022, with $2 $6 million compared to $1 2 million for the three months ended September 32021.
Positive variance of $1 $3 million or 111% was due mainly to the new revenue source earned from the SD seven and its related accessories in the quarter up $1 4 million an increase in revenues from legacy rugged devices offset by a decrease in sales of <unk> in the period.
Gross profit for the three months ended September 32022 was $860000 or 33% of sales compared to $430000 or <unk>, 35% of sales in the same period in 2021, a positive variance in gross profit of $430000.
This positive gross profit for the quarter.
<unk> was due to the additional sales into Korea diversity, seven and its related accessories offset by the decreased sales of higher margin boosters.
EBITDA was negative $1 6 million versus negative $4 $9 million in the same period. The prior year, a positive variance of $3 $3 million. This positive variance was due to increased revenue increased gross profit and a decrease in operating expenses.
Turning over to significant business highlights.
Pleased to report that Scioto has delivered on its plan to build an expanded potential customers USD seven we have previously announced the 7% certified and approved for use with many north American carrier customers, including firsthand and AT&T, Verizon Communications U S cellular and international channel customers, including logic wireless Europe .
A leading distributor of business critical communication solutions across the United Kingdom, Australia, New Zealand and the Pacific Islands, and textile our global mission critical push to talk software provider and Es, Chad a leading U S based push to talk software provider.
This foundation of increased distribution is that record leading to many potential significant volume opportunities of which we have begun shipping products and the increasing number of verticals beyond our primary focus on first responders, including government schools utilities security companies defense contractors amusement parks and hotel resorts.
Today, but a few.
I am pleased to report that the increase in number and size of our aforementioned customer base translated and tell a much anticipated volume growth for our <unk> seven which was the primary growth driver that would rugged devices that related accessories, which increased 588% year over year to $1 $9 billion in the third.
Third quarter, having said that let me be clear that this is a process.
He has been very strong and demand is growing but we believe that we are just hitting the tip of the ice Berg at a multibillion dollar industry and larger volume should follow as end customers grown to appreciate our unique offering this new product category.
Subsequent to the end of the third quarter, we announced that we successfully closed a registered direct offering with certain institutional investors to purchase approximately $4 million of our.
Common shares or preferred.
The warrants it moved thereof.
Together with concurrent private placement warrants to purchase our common shares.
The combined effective purchase price, but one common share or <unk> pre funded warrants to the privately placed where it was 2003.
We also announced an exciting new product the SD seven plus which features a wide angle camera, coupled with <unk> connectivity that will have traditional body camera functionality as well as real time, situational and positional tracking capabilities.
<unk> plus will be powered with visual labs' innovative body camera software visual labs is a highly respected software company and developer of Android based body Cam and Dash Cam software. The company provides a software to public safety private security and other customers throughout the United States and internationally. It's public safety customers include town Marshals City.
Police departments countries start sheriff offices wildlife and other state agencies and federal customers.
And finally, we recently announced the addition of the telecom industry veteran Dan Beach to our sales team Dan brings more than a decade of senior sales experience to his role.
Most recently served as the senior account manager for Motorola solutions, the global leader of public safety and Enterprise Security solutions previously Dan was in senior sales roles at first net as long as the Kyocera Corporation itself pathologies that would like to pass the line back to Daniel who will discuss some of the industry trends and market dynamics.
That are benefiting our business.
Thank you Mark North American wireless carriers have recently delivered mixed results with some carriers, beating on sales and earnings and raising profit forecast to other carriers was inline or better than forecast postpaid net additions.
Other carriers shifted to cost cutting to address rising corporate cost and rising interest rates.
Importantly in October 1st I had announced that supports more than 4 million connections to more than 23000 public safety agencies. The gain of about 1200 agencies from the 21800 agencies cited in the second quarter.
During the third quarter firsthand added 334000 connections, which represented a significant portion of At&t's 708000, postpaid net wireless phone additions.
To put these numbers into perspective.
<unk> gained more than $2 2 million post paid phone net additions through the first nine months of 2022.
First that appears to have played a significant role in this book with about 1 million connections being added for the same time period, reaching as we said 4 million connections in the third quarter. After topping 3 billion at the end of 2021 2 million in early 2021.
And $1 million in 2019.
With that I'd like to pass the line back to Glenn.
Yeah.
Thank you Daniel looking at our sales funnel, we continue to see strong opportunities in each of our three product categories.
First in our rugged handset product category, we have increased our shipments of the SD seven PTT handset that supports mission critical push to talk or M. C. PTT to North American wireless carriers and we displayed this handset at several trade shows during and after the quarter, including just.
Three weeks ago at the International Association of Chiefs of police or the IAC P show in Dallas, Texas.
The initial sales the quantity of new customer trials, the customer feedback at the Tradeshows and the direct engagement from senior personnel within the wireless carriers have all been very strong as these wireless carriers aimed to capture new customers, who have been using traditional LMR or too late.
Radios.
We're also seeing strong customer interest in our Z K seven vehicles kit that works with our S. T seven PTT handset.
Today, we are active with AT&T first net Verizon and U S. Cellular in North America, and our objective remains to expand our launch with additional North America and international carriers and with additional PTT application companies. Later this year as a result of all SD seven market.
We are confident that this will translate into multiple thousands of SD seven handsets sold throughout the balance of 2022.
Secondly in our in vehicle devices category, we continued to sell through our UV $3 50 in vehicle device with customers in North America and internationally just after the quarter, we have shipped <unk> hundred fifty's into an existing large wireless carrier customer in the middle East, which.
Launched in order. This device initially two years ago and has continued to order additional use me $3 50 devices for its first responder customer vehicles.
And thirdly in our cellular booster product category. We saw continued demand for cellular boosters. During Q3, we sold boosters through a federal contractor into the U S. Navy to support one of their bases in the U S.
We believe that more business with the U S military in future will come as a result of this deployment.
And I will now hand, the line back to Mark for closing remarks.
Thanks Glenn.
I'd like to take this opportunity to thank our employees for their commitment. They have worked tirelessly to build the company. We have today I would also like to acknowledge and thank our investors who have stood by our company. Despite the turbulent environment.
Overall, we are very pleased with the growing acceptance by our customers about unique disrupted push to talk solutions and we expect based on what we're seeing today growth in our various product categories, with especially strong growth coming from our rugged handset product category.
We're just beginning to see the rapid adoption of our disruptive solutions and Thats the displacement of land mobile radio, but could you just talk of its failure continues to progress this should drive meaningful growth for our innovative products.
We stand by our previously stated goals of new customer wins, new and existing carrier launches a continuous upgrades to our product portfolio and ultimately strong organic growth with the goal to profitability.
We will follow with third quarter financial results with the SEC form 6K.
Access them from the SEC's website search for mobile.
That concludes our formal remarks with that operator kindly open the call to questions. Thank you.
Thank you Sir.
Ladies and gentlemen, we will now begin the question and answer session.
I would like to ask a question. Please press star followed by the number one on your telephone keypad.
If your question has been answered and you would like to withdraw please press star followed by the number too.
If you are using a speaker phone please lift the handset before pressing any keys.
One moment. Please for your first question.
Your first question will come from Jack Vander Ark of Maxim Group.
Please go ahead.
Okay, great. Thank you.
Morning, guys I appreciate the update and congrats on the solid growth acceleration really great to see things ramping up.
Okay. So thanks for taking my questions as well so mark I'll just jump in on that question with the <unk> seven.
The revenue opportunity.
No.
And then I also know separately, there's DSD seven plus now as well with the body Cam, which is it sounds like a pretty innovative and another great addition to the product line.
As we look at this quarter and then we look at the fourth quarter coming up can you just describe again and walk us through kind of.
Tangible evidence you're seeing with the SD seven you mentioned have a lot of the volume upticks.
And the potential to put some of the large carrier partners.
Can you just help US understand you know just what was what were the unit sales are just roughly in this third quarter, where are they headed for the fourth quarter and then as you look at next year.
I don't see a hockey stick inflection point. Thank you.
Thank you very much Jack.
So we see a lot of.
Very very large scale opportunities and when I say most of the opportunities that thousands of units.
Hundreds of units.
ASP for the <unk> seven is around $300.
What we're solving for.
So every thousand units $300000.
We get all kinds of orders, we're getting orders now literally on a daily basis for many different types of customers and as we had mentioned on the conference call is coming from first responders in hospitality and casinos and hospitals and a defense contractor literally this device is not limited to.
Any specific entity. It can go to both for first responders and other enterprise customers and through the carriers that we're working with.
Seeing very very a lot of interest and very promising numbers that came in in this past quarter and if you ask I want to say that we saw between four to 5000 units in this past quarter I don't know the exact number but it's around that number and I think that we can continue to sell thousands of units and move up to 10000 units or more.
More for current quarter that is our goal is to get to at least 1000 units per quarter. So that we are selling on an annual basis.
Annual basis tens of thousands of units.
All of the company.
And the market is not limited in other words, it's not that there is some kind of a glass ceiling that you know you can only sell 50000 units. That's it absolutely not we could sell 200000 units a year.
Just scratching the surface because there.
So millions of units that can be sold.
There are millions of land mobile radios that are out there and we're working with the cellular carriers to displace those land mobile radios with these devices and therefore, we think that the opportunity is tremendous and the upside is tremendous and we're pushing very hard that that's also the reason that we recently hired Dan Leach.
He comes from motor rollout or the global land mobile radio our radio provider, so more radios than any other company, it's a $40 billion company.
And we think that it will be a very good addition to our our sales team.
Again, we're leveraging the cell operators to be able to get to the end customers. If we were to try to go to a hospital and sell direct to hospital would not buy from us because we're a small company that never heard of us, but one first thing that comes to them or Verizon comes to them or U S. Cellular comes to them then they know that theyre going to be working with the cellular.
That they that they took.
For us it's been put on their bill in any event it's part.
These subsidized sometimes by the carrier so in that sense. It makes much more sense, it's much much easier sale for us to get out to all the various customers.
One more thing I just wanted to I just want to add I think that one of the largest verticals for us is going to be.
The schools the education market.
And we recently put out a press release about a company that we're working with crisis go and prices go makes very very innovative Sos.
<unk> for this type of a device for the SD seven and as there are millions of teachers in the United States. There's over 100000 schools in the United States, We think that thats going to be a great market for us we're already selling to multiple schools already in this quarter, we sold to schools and in the coming quarter, we expect to sell to schools and we think that that is going to be.
Great great opportunity for us, but just think about it if there was some kind of a storm or some kind of an incident at school now the teacher can also pushed the Sos button and informed wherever she has to inform that theres a problem. As you can also speak to staff to the principal or to first responders and they're all on one network. So we think that this.
<unk> is an ideal solution together with prices go we think that its a homerun and it's something that we're very focused on and we think that that's going to be a very nice vertical for us, but again, that's just one of many verticals that we're going after we just think that thats going to be a very large vertical for us.
Great Mark a lot a lot of fantastic color there.
Appreciate that and I'll follow up with one on the <unk>.
Just for comparison in context more so.
How does how does the SD seven plus which which has yet to contribute to revenue right just to be clear.
I think that's going to be on track for a fourth quarter or first quarter of next year for in terms of revenue generation, but how does the seven plus compared to the seven in terms of AFP costs.
The overall revenue opportunity and then maybe just you have to touch on the recurring revenue aspect or opportunity of your business. Thanks.
Okay.
Great question.
We expect to.
Fully commercialize on the SP plus somewhere between Q1 and Q2, so it's still a little ways off but the main difference between the devices that it has a wide angle camera, which is run by a separate chipset within the device.
And that wide angle camera allows you to do exactly what police security companies are doing with body cameras are just to give you an idea of the size of the body camera market just in the United States is around 500000 units a year.
Trolled by two very large scale companies one is Motorola as we mentioned before the other one is a company called axon ex some of the guys that made the taser device.
Can see axons.
They are extremely profitable they sell their package of Taser device at a body camera together for $250 above okay, which is not cheap.
But thats one of their one of their best selling packages and.
And we think that we had a real start to come into the market as a newcomer again together with cellular carriers were not like axon or like Motorola that sells to the end customer we're going to be doing this together in partnership with cellular carriers selling our product the ASP on that product is higher than the seven because there's more features for this device is about.
$150 more expensive with the SEC.
And what is very interesting about this is that we're partnering with companies like visual labs, who make body camera software and we're going to be getting recurring revenue from that so we're not going to be selling just hardware. We also expect to get recurring revenue from sales of the device with the software and in General you should know Jack.
We're now working with software companies like prices go light visual labs and other companies that were in discussions with that would like to be part of the offering of SB seven and if they want that then we have to also get part of the recurring revenue because we believe that that's very important for the growth of the company and I would love to have recurring revenues that we wake up in the morning.
But we're getting recurring revenue and that is not just the hardware sale. We think that's very important the same way that axon sells their body camera with the recurring revenue piece the same way that Motorola cells of the body camera with a recurring revenues. These were doing the same thing and I think that that's going to be very good for the company going forward.
Excellent I appreciate the color there and then you have another.
Another category because it's higher margin for you guys I wanted to just touch on cellular boosters.
What's really interesting standout to me it seems like you got it you got a contract win with the federal with the federal government or with the U S. Navy at least and I think that deployment was expected to lead to additional sales with the U S. Military U S military it could be a very great customer to have if you can get in so can you just talk about.
How is your how what does that opportunity like for I guess is it just boosters.
What do you think expectations wise in terms of the revenue opportunity within the military or whatever you are able to provide it just seems like that could be a big driver and obviously boosters are also higher margin project product for you.
So we love our booster products, but for these types of situations that are long term in other words to get into the military it took us a while.
There was a tender that we felt that it took almost a year to get that original contract now that we are approved to be able to sell to the U S. Military were going after additional contracts and we think that that could be lucrative for the company I still can't say, because we've only got one contract.
Forget to say how long did excellent.
We will get them, but the fact that we have a reference in the fact that they appreciated the devices that they understood that it works with all of their cellular equipment right. So these boosters work, whether youre on AT&T, Verizon and T mobile doesn't matter, which carrier you're using it works well with all of them and they actually could be products that make sure that it works well with all the <unk>.
Carriers. So the fact that we have that stamp of approval. We're now trying to leverage that to get into additional military contracts, but thats not the only place that we're working on we're working on first med and other cellular carriers that want to launch these products with so the military is definitely a large scale opportunity.
It's more long term.
In the sense of it takes a while to get these contracts and in the meantime, we are working very aggressively to get into carrier sales and at the enterprise sales, which are shorter term and quicker turnarounds.
But it's a good business like you said the margins are great.
So we'll be continuing to focus on that.
Excellent and then maybe maybe a question for Dan for Daniel Kim.
You mentioned AT&T first net and the strong subscriber add data points that you walked us through earlier.
Can you maybe help us understand just how we should think about what the subscriber ads mean in terms of how are they correlated with with Fiat is momentum or with Fiat as future sales.
Did it become it is it is a is it a direct apples to apples kind of comparison for HAE At&t's firsthand keeps growing what does this mean, how do we view this for actual CR.
It is revenue.
It seems like USD seven continues to ramp.
Yes, excuse me that's a good question Jack.
The real ramp up now for US is with the SD seven as you saw in the quarter.
So there is there is a correlation between what our ramp up with the FC <unk> to what we're seeing with first that's continued growth one thing I'd note about first that is the original total addressable market.
When they first embarked on this was estimated to be only 3 million users.
And they upped that to roughly 10 million users over the course of time as they continue to include other verticals such as schools and other enterprises that require a critical communications, so where we.
We are seeing we are seeing the same thing so the opportunity set that we have.
Continues to grow as firsthand continues to expand its market. So there is obviously.
First that continues to deploy we would hope that we will continue to be able to participate in that growth.
If I could just add to that Jack.
Now the lowest cost.
Or one of the lowest cost devices available on first net right. So.
AT&T is incentivized to get as many blacks <unk> into the hands of first responders.
They actually have a quota that they have to meet every year with the first name of authority and they have a certain amount of time to actually have to get out so for them to be able to give out our device. Unfortunately subsidize the device to make sure that people are taking it it's actually the lowest cost solution for them, which they are happy to get into the hands of the first responders.
Because it's less much less expensive than for example, giving them a rugged samsung device, which cost them $700 right. So.
Not every single first responder needs a smartphone a powerful smartphone from Samsung for $700.
It would be enough to give a security guard yellow school bus driver.
Working with the hospital or they really need is a device like the ft. Seven so in cases like that first night are really looking to be able to put out our device and make sure that people are taking back to the macro subsidize less.
So in that sense, we think that it's a very large opportunity for us.
Okay, Great I appreciate the color from Dan and Mark. That's also helpful additions, there and maybe just one more thing as it relates to the seven plus and just your comments about AT&T and firsthand, how they're incentivized and their quota to meet.
To get the device into their customers.
The seven plus does that have a similar.
A similar dynamic in terms of how AT&T universe that would be incentivized to sell that device.
So again theyre incentivize because if they don't but let's say that they have to sell a million Sim cards, a year laxatives, because they've got a grant from the American government that in return they actually have to put out a certain amount of things every year and make sure that the network is growing and that it's becoming a network that that the American government invested it okay for purpose.
Bonkers. So again, the fact that we have an effective low cost or a cost effective device that does push to talk you know very well the person that network. That's their maintenance sensitive. Besides the fact that salespeople of course have an incentive to activate these things and they get there they need their quotas.
Activating these thin so in that sense, it's good for AT&T as a corporate as a company, but it's also good for the salespeople.
One other thing and we discussed this in the past.
Every single time on Etsy.
Is given to it lit up okay, basically what they're doing is taking out the handle that person a land mobile radio device. Okay. It's very difficult for AT&T for a sales guy to take a customer away from Verizon and vice versa, right, it's very difficult to take from one carrier to another carrier, but what you're going after.
Sure.
A school or a hospital or utility you got it right now using radios to AT&T you are saying listen forget your radios. We can do the exact same thing over a cellular network and youre not going to get from a small radio provider youre getting it from AT&T and its not going to cost you about as long as the cost of $20 a month, that's a much easier sale than trying to go through the same cut.
I'd say it here take this smartphone it's nothing like your radio there's nothing that youre used to screen and whatnot that you have to learn how to use it it's sort of it's a totally different sale. So in that sense. All they're doing is saying give us your land mobile radio and take this device. It feels the same it looks the same and youll be getting it from AT&T or you'll be getting from Verizon.
So in that sense.
Pretty easy upsell and sell for the for the Rep and they get they get compensated because they've got that new Sim activation AT&T gets the Blackstone, which is lit up and everybody's happy so in that sense, there incentive incentivize us all the products.
Okay, great well I really appreciate the update guys. So that's it for me.
Look forward to Athene has you guys execute.
Thank you very much.
Your next question comes from Tom <unk> of Zacks investment. Please go ahead.
Good morning, guys.
I think most of my questions were just answered a couple of quick ones, you're talking about the sale of rugged devices and accessories in the quarter were $1 9 million.
So USD seven was $1 4 million could you kind of clarify what else is in there or what's left in the legacy products and will those continue into the fourth quarter of next year.
So hi, this is mark so some of those legacy products are still some of the devices that we're selling in the past some of them are you'd be 350. Some of them are other rugged products that we sold in the past that you were five and EUR seven.
So we do have other devices that were still selling and yes to your to your question, we're still selling those products and we will be selling them into 'twenty one 'twenty two.
The <unk> hundred 50, <unk> is a product that we think is going to be around with us for at least.
In 2023 and beyond maybe even into 2020 for something Thats not going away, we're still getting orders for it and we think that we're going to get even larger scale orders for it going forward.
Seven and EUR five or products that we've launched many years ago. So we still have inventory and we're still going through it.
But we'll be selling that this quarter and hopefully next quarter.
So in general those are the other products that we are still selling.
Okay great.
On the financing the $4 million operating is that gross proceeds or can you comment on net proceeds and then maybe also comment if you can.
Sort of pro forma cash position currently.
Expected by the end of the year.
So the cash that we have you can see what our financials are.
Money that was that was the gross proceeds maybe take off six or 7% something like that that was various submission the legal fees and costs that we have to pay for the capital rate.
We have a healthy balance sheet at this point, we have only a few hundred thousand dollars of debt.
Our balance sheet.
And we think that we're in a good position going into the new year capital wise, So we feel very good.
Okay.
Okay, Great and then one that I just one last one did I just missed I think you answered it but then the SD seven plus.
And the market time shrink for that.
It'll be sometime between Q1 and Q2, it all depends on carrier certifications.
The reason that we call. It the seven plus is because we want to sort of allow ourselves not to have to do very long certifications with carriers is the same.
Qualcomm chipset that we use the SD seven and therefore, the certification should be much much shorter.
Certifications took now anywhere between three to six months, we think that the certifications that will take anywhere between one to three months something in that timeframe.
So we're working with the various carriers right now to work on the certification. So we believe that we'll be able to launch it commercially somewhat time in between Q1 and Q2.
<unk> displayed this product for the first time that showed that we had mentioned before.
The international Chief of police, so about a month ago and there were literally.
<unk> chief that came in and wanted to give us a credit card and by five devices and devices like smaller a police outfits literally wanted to violent spike with the best perfect. That's what we want we want a lower cost device at all it does push to talk and at a body camera solution. That's all we want we told them. It is still not in commercial air we don't sell direct we only sell through.
Carrier, because we want the carriers to give them the data package and we give them the warranty and whatnot. So we're happy to be working with the carriers to sell these products and we think that it's going to be a very strong addition to our product portfolio.
Great I appreciate it that's all I have for today. Thank you.
Thank you.
Ladies and gentlemen, once again, if you would like to ask a question. Please press star one at this time.
There are no further questions at this time I would like to turn the conference back to Mark <unk> for any closing remarks.
So again I just want to thank our shareholders.
For staying with us during the turbulent times that you are on this call then obviously youre still with US which is wonderful I think that there is a very bright future for the company.
But I think that we're now we've moved from sort of $1 million quarters to growth and I think that this growth is the beginning of additional growth going forward and that's our goal.
And I think that the company has a lot of potential and I. Appreciate that you are still with us and I think that.
That you will be happy going forward, because we're working very hard to make that happen.
If anybody has any questions you can feel free to reach out to me at Mark at <unk> Dot net and we appreciate you being on the call. Thank you.
Ladies and gentlemen, this does conclude your conference call for this morning, we would like to thank you all for participating and ask that you. Please disconnect your lines.
Thank you.
Okay.
Yes.