Q2 2023 Siyata Mobile Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the Diana Mobile second quarter 2023 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 the call you require immediate assistance. Please press star zero for the operator.
This call is being recorded on Thursday August 15th 2023.
I would now like to turn the conference over to Glyn Kennedy Vice President of International sales. Please go ahead.
Thank you for joining the sign out of mobile second quarter 2023 conference call today, I'm joined by our CEO , Mark Sealant front, and we will be available for questions at the end of the presentation.
During this call management will make expressed and implied forward looking statements within the private Securities Litigation Reform Act of 1995, and other U S. Federal Securities laws. These forward looking statements include but are not limited to those statements regarding future product offerings.
The belief that we're on the path for strong organic growth.
The goal to deliver strong year over year revenue growth and reached profitability in the coming quarters to.
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 of the sale of our rugged handsets to 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 company's 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.
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, 2022 filed with the Securities and Exchange Commission.
Now I'd like to turn the call over to Mark.
Thank you Glenn good morning, and thank you for joining the call.
Before reviewing our second quarter financials, I want to first share with you that we previously announced two capital raises on June 27 July 11th which generated a total of $4 $55 billion in gross proceeds to the company to support its working capital for growth.
And then on August 8th Seattle announced that has effected a reverse stock split for one to 100.
Common shares to the NASDAQ minimum bid price requirement.
These transactions we saw.
A stronger position to grow the business in 2023 and beyond.
Now in the second quarter of 2023 ended June 30th we're pleased to report that growth continued to accelerate with a 180% year over year increase in revenue compared to Q2 2022 on strengthening sales of our mission critical SD seven handsets and accessories.
Adoption of our critical communication devices is expanding just as important the increase in sales reaches beyond emergency services to include school safety healthcare industrial and enterprise use cases among others.
Given our performance in the first half of the year and now we're expanding sales pipeline. We are increasingly optimistic that 2023 will be a strong sales growth year for Seattle.
Total revenue was $2 $7 million in Q2, 2023 compared to just under $1 million in Q2, 2020 to a 180% increase in revenue.
Revenue from the U S was 84% of total revenue for the quarter compared to 49% in Q2 2022.
Device sales in Q2, 2023, or approximately 10 times higher than in Q2, 2020 to $2 1 million versus $220000, an increase of approximately $1 $9 billion in the quarter directly attributed to sales of the <unk> handset.
Gross margin percentage for Q2, 2023 was 29, 7% versus 11, 2% in Q2 2022 gross margin dollars increased from $109000.
$804000 or $695000 positive variance, which is greater than 600% increase in gross margin dollars.
SG&A expenses are $2 $7 million in Q2, 2023 versus $3 million in Q2, 2022, a decrease of $275000 or 9%.
Adjusted EBITDA for Q2, 2023 was negative $2 million compared to negative $3 4 million in Q2, 2020 to a $1 $4 million positive variance in EBITDA of 41% increase.
Working capital as of June 32023 was $3 7 million versus $1 $6 million as of December 31, 2020 to $2 $1 billion increase in working capital. So far this year for the six months ended June 32023, total revenue was $4 5 million.
Compared to $1 8 million in the same period of 2022, which is a positive variance of $2 $7 million or 150% increase.
Gross margin dollars were $1 $3 billion in 2023 compared to $400000 in the same period of 2022, which is a positive variance of $500000, 257% increase finally, the gross margin percentage was 29% in 2023 compared to 20% for the same period in 2022.
A 45% improvement.
Turning over to significant business highlights. We are pleased to report that <unk> has delivered on its plan to build and expand its potential customer base for the <unk> handset and accessories portfolio. We previously announced that the Senate has certified the pool for use with a growing list of North American carrier customers, including firsthand and AT&T Verizon T Mo.
While U S cellular and international carrier customers, including Dell mobility in Canada, Australia, which is the largest wireless carrier of Australia, and KPN, which is based in the Netherlands. We also previously announced that we have expanded our distribution to include strategic resellers, including two way direct and tango tango in the United States and Entropia in Belgium.
These companies will help us further grow sales of <unk> seven headsets are a leader in accessories in their respective markets and we also announced that mobile tornado is the latest PTT provider to ensure that SD seven handset will work with its PTT absolution.
This foundation of increased distribution is directly leading to many potential opportunities that could be of significant size. We have begun shipping products and an increasing number of verticals beyond our primary focus of first responders, including governments schools hospitals utilities security companies defense contractors amusement parks and hotel.
Resorts to name a few.
I am pleased to report that as we expected the increase in the number of proof of concept trials by our customer base translated into volume growth for our <unk>, seven which was the primary growth driver of our rugged devices and related accessories, increasing nearly six times year over year to $3 $5 million and the six months ending Q2 2023 compared to five.
$90000 and the six months ending Q2 2022, having said that this remains a process interest is increasing and demand is growing but we continue to believe that we are just getting the tip of the iceberg in a multibillion dollar industry. We expect even larger volumes will follow as end customers grow to appreciate our unique offerings of this new <unk>.
Product categories.
We also previously announced an exciting new product the <unk> seven plus which features a wide angle camera, coupled with what GE connectivity that will have traditional body camera functionality as well as real time, situational and traditional tracking capabilities.
The SP plus will be powered with visual labs' innovative body camera software visual labs is a highly respected software company a developer of Android based body 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 companies include tower Marshals City police departments coffee Sheriff offices wildlife and other state agencies and federal customers. We expect the seven plus with body camera capabilities will begin shipping in the coming months.
Finally, we recently expanded our sales team by hiring Doug Clark, who previously was the assistant Vice President at At&t's first that.
In the brief time that Doug has been on board with Scioto. He has already helped us to develop new sales opportunities based on his career experience and positive reputation with our customers and carrier partners and we are excited to have a person of his caliber on our team now.
Now I would like to pass the line back to Glen who will discuss some of the industry trends and market dynamics that are benefiting our business and an update on our product categories.
Thank you Mark North American wireless carriers have recently delivered mixed results with some carriers, beating on sales and earnings and raising profit forecasts to other carriers with inline or better than forecast postpaid net additions, while other carriers shifted to cost cutting to address rising corporate costs.
And rising interest rates.
Importantly in July of 2023, first net announced it supports more than 5 million connections to more than 26000 public safety agencies, a gain of about 1000 agencies. During the second quarter of 2023 from the figures. They released three months earlier during.
During the second quarter of 2023 first net added 350000 connections siad. It works closely with first net and their growth is further evidence that customers are moving towards push to talk over cellular solutions in the United States.
Looking at our sales funnel, we continue to see strong opportunities in each of our three product categories first in a rugged handset product category. We have increased our shipments of the SD seven PTT handset that supports mission critical push to talk to North American and international wireless carriers we.
Displayed this handset at several trade shows during and after the quarter, including the critical Communications World show in Helsinki in May the NASS ROE National School Safety Conference in Indianapolis in June and just last week at the <unk> 2023 show in Nashville, Tennessee.
The increasing sales the quantity of new customer trials, the customer feedback at the trade shows and the direct engagement from senior personnel within the wireless carriers have all been strong as these wireless carriers aim to capture new customers, who have been using traditional LMR or two way radios. We're also seeing strong customer interest in.
Our V K seven vehicle kit that works with our SD seven PTT handset.
Today, we are active with AT&T first net Verizon T Mobile U S. Cellular bell mobility in North America with Telstra in Australia in KPN in the Netherlands, as well as with multiple dealers and distributors in the U S and international markets. Our objective remains to expand our launch with additional <unk>.
North American and international carriers, and with additional PTT application companies in future. We've seen significant ft. Seven sales to first responders schools healthcare facilities resorts municipalities and more large U S school districts are replacing legacy two way.
<unk> by purchasing SD seven handsets to use throughout the schools they serve to help keep their students and staff safe.
We anticipate more school districts following suit in the current and coming quarters.
<unk>, we announced a large purchase order for one $4 million of our SD <unk> handset from a single customer.
As a result of all <unk> seven market activity. We're confident that this will translate into multiple thousands of FTE seven handsets sold throughout the balance of 2023 and in 2024, and we look forward to adding sales of the SD seven plus with body camera capabilities in the coming months.
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.
During the reporting period, we sold using $3 50 to one of the largest waste management companies in North America and believe this will be the first of many orders from this customer we are experiencing increasing demand for our unique VK seven vehicle kit, which is the partner product to our ft. Seven handset several customers in the U S <unk>.
Adding some with yellow school buses transit vehicles, and snowplows are installing VK seven vehicle kits into their vehicles. So that the STI seven handset can be easily used in the vehicle Curt while their staff are in their vehicles also in our in vehicle product category, We received our first order, which.
For $1.2 million.
For a new product called real time view and integrated advanced video monitoring system for emergency management service or EMS providers. They in their fleet vehicles, and thirdly, intercellular booster product category, we saw somewhat reduced but still steady demand for cellular boosters throughout north.
With America.
And now I will hand, the line back to Mark for closing remarks.
Thank you Glenn I would like to take this opportunity to thank our employees for their commitment. They worked tirelessly to build the company we have today.
I would also like to acknowledge and thank our investors who stood by our company. Despite the turbulent environment. Overall, we're very pleased with the growing acceptance by our customers of our truly unique disruptive 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.
PTT product category, we are just beginning to see the rapid adoption of our disruptive solutions and as a displacement of land mobile radio, but push to talk over cellular continues to progress this should drive meaningful growth for our innovative products.
We standby our previously stated goals of new customer wins, new and existing carrier launches and continuous upgrades to our product portfolio and ultimately strong growth with the goal of profitability. We will file our second quarter 2023 financial results with the SEC on form 6K, and urge our listeners to access them from the SEC's website.
Search for site out of mobile that concludes our formal remarks with that operator kindly open the call to questions. Thank you.
Certainly everyone. At this time, we'll be conducting a question and answer session. If you have any questions or comments. Please press star one on your phone at this time we.
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Please hold while we poll for questions.
Your first question is coming from Jack Vander <unk> from Maxim Group. Your line is live.
Okay, Great I appreciate the update guys.
Just for clarity Mark let me start with a question just I understand there are some restated financials.
Just related to one item.
$2 7 million change in fair value to a warrant that impacted the first quarter is that the only is that the main change in the restatements.
Yes, it's the main change it's a noncash issue and it was just the way that our accountants or auditors are viewed the way that we had.
<unk> looked at those warrants in Q1, we actually work with grant Thornton in Q1 to do a review of those warrants have been ordered or thought that we should be handling it differently.
And therefore, we stated that specific valuation of those warrants correct. That's the only issue.
Okay. Good thats helpful.
And then if I just move forward here I do notice that you have it looks like a bank loan outstanding of just about 700, K, which is related to our recently obtained line of credit factoring agreement for your North America receivables.
This was a new development I wasn't aware before what does this what does this do for you exactly. This this has helped bolster sales.
Yes, yes. So this is a great development because it allows us to have factoring in.
In fact for our customers all of our customers are.
Very high level weighted customers and it allows us to factor them, we entered into an agreement with the factoring facility that allows us to factor most of our customers and Thats what were doing and we hope that that number will only grow it's not necessarily a bank loan its a factor factor company loan and it's against receivables from specific <unk>.
Cases that we're giving to customers and we think that that number is only going to grow and it's a good thing because it's just assisting our cash flow and above that and give way. So it's a very good thing for the company and just Jack on that note. We're looking to do additional ways of financing without without dilution.
I can tell you that we're now looking at doing LC financings for our purchasing so between LC financing and factoring we think that that will be very very helpful. For the company. After our working capital to allow us to grow the company on our growing sales of our products.
Okay got it understood.
And then let me just look at the top line.
You did $2 7 million of sales in the second quarter, so significant growth year over year, obviously congrats on that.
Big growth sequentially as well so that's great to see now if I'm trying to look forward before looking here.
I see you did $2 6 million last year in the third quarter.
So as we look at it we're halfway through the third quarter of this year now.
Do you expect year over year growth.
In revenues year over year growth and sequential growth in the third quarter or is it going be lumpy just sending you line of sight would be helpful.
It's very hard for us to give projections just because this is the sales are really ramping up now and I don't want to say, it's new to us, but it's relatively new to us getting this level of sales through the carriers and it's going really in a.
Great direction for the company.
We do hope and our goal is to definitely have.
Double digit growth on a year basis for sure I can't tell you what's going to be in Q3 or what would be in Q4, but from what we're saying we're going to have substantial growth in the coming quarters just.
Just based on orders that we have coming in.
Partnerships that we've already signed and we think that.
It's going to be a very different company in the coming quarters that the same way that you've seen in the first half of the year, we think that thats going to continue going forward.
Okay Gotcha.
There was comments you guys for I think it was Glenn that was providing comments in his prepared remarks about AT&T first net adding.
It was over 300000, new subscribers I believe.
How do you.
Who are the subscribers signing up with then what devices are they are they signing up with and how do you. How do you start to get a larger piece of that with these new first that subscribers turning on.
So so the more that first of all there is lightening up some quarters. That's good for us because that's one of our main customers.
They are working right now with companies like Samsung and Apple and a company called <unk> technologies. Those are probably the three main vendors that they are working with right now.
But we think that we have something which is very unique we're the only vendor that has a device that looks and feels like a radio but to cellular based device everybody else, we're selling higher end smartphone devices.
We are the most cost effective mission critical push to talk device available at first in that today.
And we see that traction coming in from.
Both in this quarter and the sales that we had in Q2 and we see that coming going forward also.
So as I said as first and that grows that's a good thing for us and our market is clearly much bigger than just first responders. First met include schools that includes government. It includes military contractors that includes airlines. So it's not just first responses on first that that we're working with it includes.
Utility.
There's a lot of various verticals that we're going after and we believe that it's a very very large market and the more that we get traction.
Business brings business more schools, we get the more schools, we can find out because we have reference customers. The more utilities, we get more utilities you can sign up because we have reference customers and we just see that momentum building and it's a very exciting part of the company.
Great. Okay, and then just just in terms of big needle movers I know this is kind of a domino effect and youre spreading brand awareness. Obviously these are all these are all great at additives.
Do you have.
And expectations or any visibility in to you I'm sure you're working behind the scenes hard with new sales hires but is there any any just sense of when you might see a large volume order arrangement in the near future.
So.
There are a few very large scale opportunities that we're working with for a large school districts.
Large corporations, just corporations that employ tens of thousands of people, but those are similar opportunities that are not even going to get sold in one quarter. If we got a large school district that would need 20000 units that would probably spread over two or three quarters right. So it's not that we will get one order for 20000 units will get an order for two.
<unk> thousand units six to 7000 units over two or three quarters, because they have to roll it out throughout the school district, just as an example, but there are multiple opportunities like that that we're working on having said that we're getting a lot of a few hundred thousand dollars orders and we're not necessarily putting out <unk> in every single order, we can get $50000 orders.
Our $1 orders of 300000 dollar order some of them, we put the hours out on some of them. We don't and we're also very happy just to just to.
Again continue filling the bucket with the smaller drops because they add up.
So we're seeing both large scale opportunities, obviously those take longer but we do have trials with multiple large scale opportunities and we have ongoing sales to smaller opportunities 100, hundreds of thousands of dollars or even larger than that.
Okay, great well I appreciate the answers to the questions and Greg.
Great to see the growth I hope it continues.
If I could just wanted to add one more thing Jack.
You look at the market cap of the company right now we're around $7 billion market cap. So again, we think that we're going after a major market. We already had our customers signed up the major cellular carriers in the United States and all of that is that a $7 billion market cap and Thats why we feel that we're at a real inflection point for the company and for the.
<unk>.
Understood. Thanks Mark.
Thank you.
Yeah.
Thank you. Your next question is coming from Tom <unk> from Zacks investment Research Your line is live.
Good morning, guys.
Couple of quick ones.
Can you provide further color on the European markets in those distribution channels is that gained traction yet or is that more of a 2024 type story.
That's definitely that's definitely a Glenn question.
Hey, Tom Thanks for the question I would say things are growing in Europe , not quite as quickly as in North America simply because the adoption of push to talk over cellular is trailing in Europe relative to what's happening here in North America, but we are seeing we are having good conversations with multiple distributors multiple.
Carriers, there and so we do expect that that will follow albeit just a little bit later than what we're experiencing in the north American market.
Okay, great and the specific question on the SBA seven plus does that still.
The appeal to the all of the verticals you guys talk about or is it more narrow towards law enforcement or.
With all the verticals of health care education benefit.
Seven plus.
So so we're specifically starting trial soon in the education vertical for security within the education within schools. So that security law enforcement wildlife. There's hospitals. There is a lot of different verticals that we're going after with this.
No not necessarily leisure.
As another area that we started going into now but there are a lot of large scale verticals that we are doing trials with right now with the seven plus then.
I'll give you. An example, we have one school district, which is taking from us.
<unk> 1000 units of the <unk> seven they're also going to be probably taking a few hundred ft. Seven pluses for various security people that are related to that school district. So it is related to <unk>.
Okay, Great and just one last financial question the share count.
Yes.
Has it changed much from the issuance date and that was $185 4 million or one eight post split.
Is that the current share count as of today, yes, yes.
Okay, great. Thanks.
That's all I have for this morning. Thank you.
Thank you very much.
Thank you that completes our Q&A session everyone. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.