Q3 2023 Siyata Mobile Inc Earnings Call

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Good morning, ladies and gentlemen, and welcome to the Seattle Mobile Q3, 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.

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This call is being recorded on Thursday November 16th 2023, I would now like to turn the conference over to Glen Kennedy Vice President of International sales. Please go ahead.

Thank you for joining us to stay out of Mobile's third quarter 2023 conference call today, I'm joined by our CEO, Mark Sealant, Brian and we will be available for questions at the end of the presentation. During this call management will make express and implied forward looking statements within the private Securities Litigation Reform Act of <unk>.

1995, and other U S Federal Securities laws.

These forward looking statements include but are not limited to those statements regarding future product offerings to believes that we are on the path for strong organic growth.

Goal to deliver strong year over year revenue growth and reach profitability in the coming quarters, and the timing and 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 considerations.

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 to forward looking statements contained in this presentation.

Our subject to other risks and uncertainties, including those discussed in the risk factors section and elsewhere in the company's annual report on form 20-F for the year ended December 31, 2022 filed with the security and Exchange Commission.

Now I would like to turn the call over to Mark.

Thank you Glenn.

And thank you for joining the call.

The third quarter of 2023 ended September 30th revenues were $1 $8 million compared to $2 6 million in Q3 2022, due mainly to decreased sales of our mission critical SD seven handsets and accessories.

This occurred mainly due to moving from non stop status to stop status with a major U S carrier partner at the end of Q3 2023.

Adoption of our critical communication devices is expanding both in the U S and in international markets and multiple verticals, including public safety education healthcare security hospitality and more.

Given our performance throughout the first three quarters of the year and now we're expanding sales pipeline. We are increasingly optimistic that 2023 will be a strong sales growth year for SAP, which will carry momentum into 2024.

Revenue from the U S was 69% of total revenue for the quarter compared to 64% in Q3 2022 rugged device sales in Q3, 2023 were $1 1 million versus $1 9 million in Q3 2022, a decrease of approximately $800000 in the quarter due to a decrease in sales.

Of the seven handset as we transition from non stop status as box status with a major U S carrier.

This stock position status is a significant achievement for sad, which very few device suppliers ever achieved this means that this carrier will now market and subsidize the SD seven handset to many more customers, which we expect will drive stronger sales.

Gross margin percentage for Q3, 2023 was 26, 6% versus 33, 3% in Q3 2022.

Gross margin dollars decreased from $856000 to $490000 or $366000 negative variance, which is a 43% decrease in gross margin dollars SG&A expenses were $2 $7 million in Q3, 2023 versus $2 4 million in Q3 2022, an increase of.

$300000.

Adjusted EBITDA for Q3, 2023 was negative $1 6 million compared to a negative $1 $6 million in Q3, 2022, which was essentially unchanged.

Working capital as of September 30th 2023, with nearly $3 $8 million versus just over $1 6 million as of December 31, 2020 to $2 $1 billion increase in working capital.

So far this year for the nine months ended September 32023, total revenue was $6 4 million compared to $4 $4 million in the same period of 2022, which is a positive variance of just under $2 million.

Or 45% increase.

Gross margin dollars were $1 $8 million in 2023 compared to $1 2 million in the same period of 2022, which was a positive variance of just under $600000 or 47% increase.

Finally, the gross margin percentage was 28, 2% in 2023 compared to 27, 9% in the same period of 2022 slight improvements.

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 ft, seven handset and accessories portfolio.

We previously announced that the SD seven is certified and approved for use with a growing list of North American carrier customers, including first net and AT&T Verizon T Mobile U S cellular and international carrier customers, including Dell mobility in Canada, Telstra in Australia, and KPN in the Netherlands.

We also previously announced that we have expanded our distribution to include strategic resellers, including two way direct goes down and tango tango in the United States and Tropea in Belgium radio trader and the U K consort digital in India and others. This foundation of increased distributions directly leading to many potential opportunities that can.

Can be a significant size, we continue to increase the number of proof of concept trials by our customer base, which we believe will translate into volume growth for our SD seven rugged devices and related accessories, especially now that we have achieved stop status at a major U S carrier.

Having said that this is a process as these sales efforts require carrier salesforce training customer trials and technical support and we will remain focused on aggressively growing our revenue in this multibillion dollar industry. We expect even larger volumes will follow as end customers grow to appreciate our unique offering in this new product category.

We also previously announced an exciting new product the <unk> seven plus which features a wide angle camera coupled with Ford you connectivity that will have traditional body camera functionality as well as real time, situational and traditional tracking capabilities. The ft, seven plus will be powered with visual labs' innovative body camera software visual.

This is a highly respected software company and developer of Android based body Cam software. The company provides a software it's a public safety private security and other customers throughout the United States and internationally is public safety customers include town Marshals City police departments country Sheriff offices wildlife and other state agencies and federal customers.

We are starting customer trials and expect the SD seven plus with body camera capabilities will be shipping in the coming months.

In addition in June of this year, we announced a new product called site at a real time view together with a major order. This is an innovative real time camera system installed and first responder and enterprise vehicles to provide better fleet management and control.

In Q3, we installed our first units and ambulances at a leading international Vms customer and the system provided outstanding results in real time fuel cases.

We continued to rollout this product to additional ambulances in E&S vehicles, but expect this to be a great add on to our product portfolio in 2024 and beyond.

And finally, we previously announced that we expanded our sales team by hiring Doug Clark, who previously was an EVP at At&t's first that in.

In the brief time that Doug has been on our team 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 very excited to have a person of his caliber on our team.

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 an update on our product categories.

Thank you Mark on September 30th 2023, first that announced it now supports approximately $5 3 million connections to 27000 public safety agencies, a gain of about 1000 agencies. During the third quarter of 2023 from the figures. They had released three months earlier.

During the third quarter of 2023 first net added approximately 300000 connections Seattle works closely with first net and their growth is further evidence that U S. First responder customers are moving towards push to talk over cellular solutions.

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.

We are focused on growing sales of the 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 in August at the Opco 2023 show in Nashville, Tennessee.

And multiple regional shows in the U S in partnership with firsthand.

The newly granted stocked status from a major U S carrier 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 strong as these wireless carriers aimed to captured new customers, who have been using traditional LMR or.

Two way radios.

Today, we are active with all major North American carriers as Mark mentioned and also with Telstra in Australia, 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 North American and international carriers and with additional PTT application companies in future.

We have seen significant SD seven sales to first responders schools healthcare facilities resorts municipalities and more.

A large U S school districts are replacing legacy <unk> radios by purchasing SPE 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.

Recently, we announced a large purchase order for $750000 of our rugged handsets from a single customer in partnership with sync communication for first responders in Israel.

As a result of all SD seven market activity, we're confident that this will translate into multiple thousands of SD seven handset 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 continue to sell through our UV $3 50 in vehicle device with customers in North America and internationally, we are experiencing increasing demand for our unique VK seven vehicle kit, which is a partner product to our S. T seven handset.

Several customers in the U S, including some with yellow school buses.

<unk> vehicles, and snowplows are installing VK seven vehicle kits into their vehicles. So that the SD <unk> handset can be easily used in the vehicle kit, while theres staffer in their vehicles.

And also in the in vehicle product category prior to the third quarter of 2023, we received our first order, which was for $1 $2 million for a new product called say on a real time view and integrated advanced video monitoring system for emergency management services or EMS providers in their fleet vehicles, Mark mentioned that we have begun to.

To install the system into ambulances and first responder vehicles during the third quarter of 2023, and we look forward to more sales opportunities for this solution in 2024.

And thirdly in our cellular booster product category, we saw reduced but still steady demand for cellular boosters throughout North America.

And now I will hand, the line back to Mark for closing remarks.

Thanks Glenn.

Overall, we are excited to see a growing number of customers choose to transition from legacy la more devices to our site out of PTT handsets and accessories. We are pleased that this is happening across a wide variety of vertical industries and across multiple geographical markets. We believe that the core fundamentals are now in place to grow our business.

In North America and in international markets.

Our goal remains to ramp up sales to reach breakeven and then profitability as soon as possible and this focus is shared by our entire board and management team.

We'll file our third quarter 2023 financial results with the SEC on a form 6K and urge our listeners to access them from the Sec's website search for say out of mobile.

That concludes our formal remarks with that operator kindly open the call to questions. Thank you.

Certainly at this time, we will be conducting a question and answer session.

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Your first question for today is coming from.

<unk> <unk> with Maxim group.

Okay, great. Good morning, Thanks for the update and taking my questions.

Mark Let me just start with a quick question housekeeping question on the Opex line.

Third quarter 2003, total opex of $2 7 million it looks like <unk> expenses picked up which makes sense to support sales growth, but you guys meaningfully reduced G&A expense and in overall opex is down pretty meaningfully.

Which is good to see is this a normalized quarterly opex level going forward are there any puts and takes a one time blips in this in this quarter or is this a good go forward rate for an analyst perspective. Thanks.

There are.

First of all Hi, Jack how are you.

There definitely are some one time expenses that youre not going to see going forward and I think that it's actually a higher quarter than what youre going to see going forward and I think that the general the Opex and also the G&A, we're going to be a little bit lower. So this is on the high side, it's not it's not even standard.

Got you Okay. That's helpful to know.

I appreciate that and then okay. So let me switch gears here too.

The more exciting stuff that I wanted to talk about which is you mentioned you experienced some slight order delays due to this transition from a non stop just stock status with a large U S wireless carrier and it seems like a big opportunity clearly that we've been kind of waiting for.

So does this imply you had orders.

One thing that does this imply you add orders that you expected to receive in the third quarter that slipped into the fourth quarter or is this.

It was just kind of more of a pause as you signed the stock status deal and now you are preparing to train their their team and get them caught up to speed with what's going on with the with the potential orders and delays. Thanks.

So just to explain to you what this means so if until now AT&T or its distributors with Delaware devices at MSRP at around $400 now the way that they're going to be selling it as they are.

Subsidizing it down to 99 cents and then you have to pay a certain price per months on your bill and Thats anywhere between let's say, 20% to $30 per month and that includes the device and the cellular package on the PTT package. So the minute that customers heard that theyre not going to have to pay full MSRP that theyre going.

Able to get it subsidizing paid over let's say two years, obviously customers. It's much much more attractive for them any customers that were thinking a wider product pushed it out until it was stock products.

You can understand it's very.

Clear that every customer would prefer to have it the way that we're doing it now and this is basically the dream of every small vendor that works with the large carriers that have a product stock that's not something that's trivial. It's very unique for a company of our size I would say that we are by far the smallest company that has a stock product at a major carrier in the United States.

And yes, I think that that's going to help drive sales.

Dramatically in the coming quarters and going forward, just because it makes it so much easier for customers to buy it.

Now sort of at the same <unk>.

Level of playing together with the other company that has helped push to talk over cellular devices that are mainly smartphones more expensive than our product, but they're also subsidized so let's say, let's say, a samsung product, which cost double the price of our product maybe that customer will pay $40 a month ago at $20 a month for hours.

Both products are now 99.

So in that sense it.

Its a homerun first IATA and we expect that that's also going to help sales and.

In a big way going forward.

Okay is there is there any way you do you have any more.

Specific or visibility into the timing of sales from this arrangement and just visibility into the size of the orders and revenue visibility inventory planning.

Is there any is there anything more tangible that you can point to that gives you confidence that this is nir.

Near term growth.

The only confidence that I have is from discussions that we've had with the carriers with the various sales teams with various customers that we're starting to sell to and ramp up too.

Can't give you an exact number because we're not there yet and thats really the reason that we can't give guidance until now is because we don't have a track record of quarters that we understand what kind of sales we're going to get every quarter I do believe that our coming quarters are going to be better than they were in the past I can't give you an exact number but just from the conversations that we're having from the partnerships that we've built.

From the fact that we have a stock product now I think that theyre going to be higher even dramatically higher than what they've been until now that's the plan and that's where we see it going.

Okay, and then including the stock deal and just outside of that everything all put together as youre looking at the fourth quarter, we're about halfway through through this fourth quarter now.

Is there anything you can touch on just in terms of relative sales expectations as a whole are you expecting to grow above this third quarter that you just had.

What do you think from the year over year from the fourth quarter of last year.

So we expect to grow over the third quarter, we expect to grow year over year, and we think that from this fourth quarter going forward, we're going to have much better quarters than we've had in the past.

I wish I could tell you more but I can't not because I don't want to but it's because it's not an exact number right now.

But from what we've seen in the first part of this quarter, what we see coming in for the second half of the quarter and what we see going into next year. We think we're going to have much better quarters are much stronger sales than what we've had in the past and again, it's all based on the partnerships that we've built up over the past two years, it's not even years over the past two years all the partnerships.

All the Msas that we signed with the various carriers all the dealers from the carriers that we're working with all the trials that we've done with the various customers you take that you put it all together and Thats what gives us a lot of confidence that the coming quarters, including this quarter could be much better than what you've seen in the past.

Okay, great to hear great to hear and then maybe just one more for me.

I did hear you mentioned it on the prepared remarks, but maybe just looking for more of a detailed update what's the latest with the SD seven plus opportunity and potential sales. There have you begun selling that device yet or.

Is it something thats going to contribute.

Fourth quarter sales in meaningfully to 2024.

We're now doing trials with the seven plus I think that it will not I know that it will not contribute in Q4.

But we do believe that it will contribute next year.

We have multiple opportunities for that product, we think that it's going to be very good revenue generator for us going into 2024 and beyond.

The only product that is going to be approved on a carrier network that will allow you to do both push to talk and have body camera software on it there is nothing else looks like that out there.

So we think it can be a great product for us, it's not going to contribute this year, but we do believe that it will contribute in 2024.

Okay, great Great and can you just remind me mark.

In terms of real time view and then the <unk> seven plus with the body Cam are those are those two separate distinct.

Recurring revenue opportunities.

Is there any sort of attach rate of real time view as well that you that you imagine with the sales.

Of devices.

We only started selling that real time view and I think it's it proved itself unbelievably and one of our customers I mean, just the fact that it was on the news.

It's called the Fiat they called it the site out of Black box and we might even change when they entered the play out of black box because it just it did such a great job in picking up our videos in critical situations.

And we think that it's going to be a great device for us to be selling together with our in vehicle products.

Both in Q4, but also in going into 2024.

That we are able to get recurring revenue from that is also great again.

Again, we still don't have an exact number of what that's going to give us to the bottom line what that recurring revenue is going to give us going forward, but as we saw more and more devices. We do expect to get recurring revenue from that product same thing with with a body camera. So we work with third party software companies, we have agreements with them that we get part of that recurring revenue and Thats all.

We're able to generate recurring revenue through our hardware.

So both of those products to your question, yes, they have a recurring revenue piece and we're going to try to get as much as we can out of that so that we also have recurring revenue on a monthly basis.

Okay, Great and then actually just one more question just.

Just because I think it'd be helpful for investors and for analysts perspective, as well just to get a sense of.

It kind of gives us a signal of your confidence and visibility.

Do you imagine anytime in the next couple of months, maybe when you report the fourth quarter and in March.

What can we expect some sort of high end higher general guidance ranges for revenue sales do you think you'll have enough visibility to provide any guidance or.

Even informal expectations by the time next quarter rolls around.

Yes, I think that.

By the end of the first quarter.

We're going to have a very interesting first quarter.

Just because it's going to be a quarter that sort of everything that we've been working on come to fruition, but I think that by then we might have a better understanding of what this stock product.

Situation really means for us.

Sort of the pace that we're going to be on that.

That's sort of going to be a big part of our revenue I'm not going to say, it's going to be 30% or 50%, but it's definitely going to be a meaningful part of our revenue.

I think that probably by the end of the first quarter, we should be able to give some kind of guidance and again, it's going to be I'm not going to say that.

It's 100% that guidance, because we're still not there, but as we get more and more traction in the market and as we understand better the.

Sales cycle, how long it takes for customers to make decision how long it takes for us to get the orders and to produce products into really pick up pace I think that will feel more comfortable giving giving guidance, but I don't want to it is that right now I still can't but I think that at the end of the first quarter will already have more visibility and then hopefully quarter after quarter, we'll be able.

To give better visibility going forward, where we can consolidate.

Okay, Great I appreciate the insight there and thanks for taking all my questions I'll hop back in the queue. Thank you Jack.

Yes.

Your next question is coming from Brian Lynn tier with Zacks small cap research.

Good morning, gentlemen, sitting in for Tom curve today.

I just wanted to circle back to the real time view.

And maybe if you could give me a little bit of insight into.

The vertical that you're seeing.

Seeing the most interest from right now and where you think the greatest opportunities will be for that product.

Okay. So right now we're very focused on MS. And this is a great product for EMS.

We're seeing a lot of success with ambulances.

With.

Other EMS type vehicles.

So thats certainly a vertical that we're very focused on but also for commercial fleet.

For security fleets is something Thats very interesting just given the fleet manager a very high level of control to be able to know what's going on with that vehicle and actually see the vehicle remotely whether from a control center, our command center or from their phone, they're able to put in certain information into their control center.

So that the drivers are driving correctly, if the driver goes out of a certain <unk>.

<unk> and.

It allows the fleet the fleet managers to really have much more control, but even more than that it allows them to know what the driver is seeing when the driver is in certain areas.

Type of system is very desirable for a lot of fleet manager, but just want to have more control over their fleets.

Sort of what we're doing we're very cost effective.

The device works really really well you can put it on Android phones are on.

So you can really control it from any phone that's out there so.

So it's just it's a very strong tool and we found that.

We've been working very very well over the past two or three months and therefore, we think that we'll be able to ramp up based on this initial cost of the <unk> that we have we're now doing trials with multiple additional customers. One of them is a very very large security company that moves around body. So you can imagine what type of customer that is they want to be able to understand.

Where the drivers are what the drivers are seeing.

360 degrees around the car exactly what their structure.

So there's a lot of different applications for that and by the way. This is not just good for the United States and certainly good for international markets and we're showing this to all of the.

Dealers that we deal with both in the United States and in Europe, and other international markets. Because it's something that is very interesting for all different types of markets. So in that sense. It is.

It's good for the company, because we're able to leverage the existing relationships that we have just offering them a new product now we're obviously offering this together with our <unk> hundred 50, together with our Vaca <unk> seven so it's sort of part of our in vehicle portfolio. So in that sense.

It's a very good fit for what we're doing.

Goodwill will there be a dedicated sales team.

<unk> for this product or will it be just a part of your suite of services.

Just just a part of our suite of services myself and they know how to sell and vehicle products, we're really going after and vehicle customers. So it's basically we're able to leverage our existing sales team to be able to solve this additional products.

Okay great.

Looking at the burn.

Today post the financing.

In late October.

If you could comment a little bit on your current.

Financing needs going into 2024.

Right so.

I'm not going to say that we don't have to raise more capital because we will have to raise more capital at some point.

We don't have to raise a lot of capital and our expectations. Okay. If things work out the way that we hope they do and if we ramp up sales that the way that we expect to ramp up sales. We will have to raise another I want to say $2 million to $3 million to be able to support that growth.

But.

It might it.

It might not seem this way, but the company is not looking to raise capital every couple of months, we're not looking to do that we're looking to raise enough capital to get us to breakeven profitability and once we're there we want to be off to the races, and we think that we're very close we think that we're going to have very strong quarters going forward and with a strong quarters.

We'll have to wait another few million dollars to support them, but once we're there we will hopefully be able to grow the company just from our ongoing.

And profits and whatnot and we think that we're going to get through in the coming quarters. We think that's very realistic.

Alright.

Just a housekeeping number to update my model the <unk>.

Total outstanding shares currently three seven is that in the ballpark.

No I think it's closer to four two.

You have to look on our presentation to get the exact number but I think it's around four two.

Alright, great. Thank you guys.

Thank you.

We're at our allotted time for this call and I would now like to turn the call back to Mark for closing remarks.

Thank you very much for attending this call. We appreciate it if you have any additional questions youre welcome to reach out to us and some of us an email.

And we look forward to keeping you updated as we progress. Thank you very much and have a good day.

This concludes today's conference call you may disconnect your phone lines at this time. Thank you for your participation.