Q4 2023 Boxlight Corporation Earnings Call

Good afternoon, and welcome to the Bauxite Corporation fourth quarter financial results call. At this time, all participants are in a listen only mode.

Operator: Good afternoon, and welcome to the Boxlight Corporation fourth quarter financial results. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Submit a question via the web at any time by typing it in the Ask a Question field and pressing Submit.

A question and answer session will follow the formal presentation you.

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Operator: If you have dialed in today, please press star 1 on your phone at any time to enter. Please note that this conference is being recorded. I will now turn the conference over to our host, Jeff Stanlis, of FNKA, if you like. Thank you, Paul.

If you have dialed in today. Please press star one on your phone at any time to enter the Q&A queue.

Please note that this conference is being recorded I will now turn the conference over to our host Jeff status of F. N. K I R. You may begin.

Thank you Paul and thank you everybody for joining earlier today <unk> issued a press release, providing an operational update and discussing financial results for the fourth quarter and full year ended December 31, 2023. The release is available on the Investor Relations section of the company's website at Www Dot oxalate dot com hosting.

Jeff Stanlis: And thank you everybody for joining us today. Earlier today, Boxlight issued a press release providing an operational update and discussing financial results for the fourth quarter and full year ended December 31, 2023. The release is available on the investor relations section of the company's website at www.boxlight.com. Hosting the call today are Dale Strang, Chief Executive Officer, and Greg Wiggins, the company's Chief Financial Officer.

On the call today are Dale Strang, Chief Executive Officer, Greg Wiggans, the Companys Chief Financial Officer.

Jeff Stanlis: Before we begin, I would like to remind participants that during the call, management will be making forward-looking statements. These statements may contain information about Boxlight's view of its future expectations, plans, and prospects that can constitute forward-looking statements. Actual results may differ materially from historical results and those indicated by the forward-looking statements as a result of a variety of factors, including, but not limited to, risks and uncertainties, risks and uncertainties associated with its ability to maintain and grow its business, volatility of operating results, its development and introduction of new products and services, marketing and other business development initiatives, and the competition in the industry, among other things. Boxlight encourages you to review other factors that may affect its The company does not undertake and specifically disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, except as required by law. Dale, the call is yours.

Before we begin I would like to remind participants that during the call management will be making forward looking statements. These statements may contain information about box lights view of its future expectations plans and prospects that can constitute forward looking statements.

Actual results may differ materially from historical results and those are indicated by the forward looking statements as a result of a variety of factors, including but not limited to risks and uncertainties.

Risks and uncertainties associated with its ability to maintain and grow its business variability of operating results, it's development or the introduction of new products and services marketing and other business development initiatives and the competition in the industry among other things.

Oxalate encourages you to review other factors that may affect our future results and performance in bauxite filings with the Securities and Exchange Commission.

The company does not undertake and specifically disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur except as required by law.

And now I'd like to now turn the call over to Dale strike CEO of box like Dale the call is yours.

Thank you, Jeff and thank you to everyone joining us today.

Dale Strang: Thank you, Jeff. And thank you to everyone joining us today. I transitioned from our Board of Directors to the position of Chief Executive Officer just over a few months ago, and I can share with you that my first few weeks in the role have reinforced the prior perception I had about Boxlight. We indeed have excellent products, loyal customers, and devoted, creative employees who work exceptionally hard. So the bones here at Boxlight are strong.

I transitioned from our board of directors to the position of Chief Executive Officer, just over two months ago.

I can share with you that my first few weeks in the role of reinforced the private reception I had about bauxite, we indeed have excellent products loyal customers and devoted creative employees, who worked exceptionally hard.

So the bonds here with box under strong.

Dale Strang: Over the past few years, we've made a number of acquisitions to broaden our product portfolio and to increase our geographic reach. These acquisitions, as a result of that, have resulted in expanding our addressable market. Following the completion of those acquisitions during 2022 and 2023, we were able to pay down a meaningful portion of the long-term debt we took on to make those acquisitions, and we're convinced that was the right and valid decision. However, after a surge in pandemic-related spending, market demand moderated, and we didn't, as an organization, react nearly quickly enough to reduce our forecasts, adjust our operating plan, and align our Not surprisingly, the combination of these missteps impacted our operations and put a spotlight on certain inefficiencies in our organization.

Over the past few years, we've made a number of acquisitions to broaden our product portfolio and to increase our geographic reach.

These acquisitions.

As a result of that.

We resulted in expanding our addressable market fall.

Knowing those completion of those acquisitions during 2022, and 2023 were able to pay down a meaningful portion of the long term debt. We took on to make those acquisitions and we're convinced that was the right decision.

Wherever after surgery pandemic related spending the market demand moderated and we didn't visit organization reacts dearly quickly enough to reduce our forecast adjust our operating plan and align our expense structure to match the current market environment.

Not surprisingly the combination of these missteps.

Impacting our operations and put a spotlight on certain inefficiencies in our organization.

Dale Strang: We're now in the process of changing their corporate mind. Approaches to managing: my approach is to manage based on what's the best available factual information, and accurate forecasting is paramount for sound capital allocation and to efficiently manage our operations. We recognize that our investors have been frustrated, and rightfully so, by Boxlight over-promising and under-delivering. We view our share price as a report card on our performance, and we're making adjustments to our operational activities to position us to achieve better grades this year. To be clear, our challenges will take time and energy to address. There's no single solution, and improvement will not happen overnight. We have several challenges to address, and many of the challenges we face are self-inflicted. One challenge is our capital structure. We need to streamline our debt facilities while solidifying our relationship with other stakeholders like our preferred shareholders. Another important issue is operational integration.

We're now in the process of changing your corporate mindset, our approaches to manage my approach is to manage based on.

What's the best available factual information and accurate forecasting is paramount for sound capital allocation and to efficiently manage our operations.

We recognize that our investors have been frustrated and rightfully so by box right over promising and under delivering.

We view our share price as a report card on our performance.

We're making adjustments to our operational activities to position us to achieve better grades this year.

To be clear our challenges will take time and energy to address there is no single solution and improvement will not happen overnight.

There are several challenges to address many of the challenges we face.

Self inflicted.

One challenge is our capital structure, we need to streamline our debt facilities, while solidifying our relationship with other stakeholders like our <unk>.

<unk> shareholders.

Another is operational integration.

Dale Strang: The multiple acquisitions we've made over the past several years have enabled us to grow and expand our private product portfolio and enhance our team, but we have not done enough yet to integrate those acquisitions, which has resulted in duplicative costs, repetitive processes, and a fragmented go-to-market strategy. Simply put, we've just not done enough to integrate those valuable assets acquired over the last several years. As a result, our cost structure is revealed to be too high, and we're not capitalizing on the synergies that we have in front of us that can drive efficiency. These challenges have been heightened by the marketplace today, in the education market, which benefited greatly from accelerated government investment during the pandemic and then and then corrected once that accelerated government started this off. Boxlight, like many companies, scaled its infrastructure during that pandemic to respond to increased demand. But we were a little too slow to respond when the demand moderated.

The acquisitions, we've made over the past several years.

Enables us to grow and expand their private.

Our portfolio and enhanced our team.

But we've not done enough yet to integrate those acquisitions, which has resulted in duplicative costs repetitive processes in a fragmented go to market strategy.

Simply put we've just not done enough to integrate those valuable assets acquired over the last several years and as a result, our cost structure as we deal to be too high and we're not capitalizing on the synergies that we have in front of us that can drive efficiencies.

These challenges have been heightened by the marketplace dynamics in them.

Education market, which.

Benefited greatly from accelerated government investment during the pandemic.

And then and then corrected once this.

That accelerated government investment.

Starting to soften.

Like many companies scale their infrastructure during that pandemic and we wish to respond to increased demand.

But we were a little too slow to respond when the demand moderated.

Dale Strang: I've been here about 10 weeks since I assumed this position, and we've made significant progress in addressing the issues I outlined. First, we're aligning our leadership, focused on creating a more customer-centric organization that's designed to better understand the evolving needs of our customers, and we're actively engaged in making sure that we develop these tailored solutions that help meet those needs. We're making really good progress, great progress in streamlining our product catalog, eliminating redundant products, parts, and other items that consume time and resources without adding commensurate value. And we are taking aggressive steps to adjust our operating code, with a focus on aligning those costs exactly to what the current revenue opportunity is likely to be. We've kicked off multiple efficiency-driven workstreams that will result in us taking millions of dollars out of our annualized OPEX, and that drive for OPEX efficiency won't be momentary. It'll be thorough and ongoing.

I've been here about 10 weeks since I assume this disposition, we have made significant process in addressing the issues I outlined.

First we are realigning our leadership team.

Focused on creating a more customer centric organization that is designed to better understand the evolving needs of our customers and we're actively engaged in making sure we develop tailored solutions that help meet those needs.

We're making really good progress great progress streamlining our product catalog, eliminating redundant products parts and other items that consume time and resources without adding commensurate value.

And we are taking aggressive steps to adjust our operating cost base with a focus on aligning those costs exactly to what the current revenue opportunities is likely to be.

We kicked off multiple efficiency driven work streams that will result in us taking millions of dollars out of our annualized opex that drive for Opex efficiency won't be momentary there'll be thorough and ongoing.

Another item, we are streamlining as well as mentioned is our capital structure, our debt facility. Our senior debt facility Whitehorse was intended to be a short term solution to fuel our growth initiatives.

Dale Strang: Another item we're streamlining, as mentioned, is our capital structure. Our debt facility, our senior debt facility at Whitehawk, was intended to be a short-term solution to fuel our growth initiative, and prior management expected to refinance that term debt by the end of 2023. And while that hasn't yet happened, we've had productive engagement with those lenders, and we're working towards a resolution. We've engaged an investment banker to provide us with options, and the initiative is moving forward. In the interim, our existing lenders have been very supportive and cooperative as we evaluate an appropriate long-term solution and work towards that resolution.

And Prime management expected to refinance debt term debt by the end of 2023, and while that hasn't yet happened we've had productive engagement with those lenders and we are working towards resolution.

We've engaged an investment banker to provide us with options and the initiative is moving forward in the interim our existing lenders have been very supportive and cooperative with us as we evaluate an appropriate long term solution and work towards that resolution.

Dale Strang: This has been a period of significant change at Boxlight. New senior leadership, restructuring operational leadership, adjustments to our go-to-market approach, and aggressive cost reductions are all going on simultaneously. I'm incredibly impressed with the positive reaction from our employees who have embraced the challenge of the new Boxlight and responded with creativity and renewed dedication. And similarly, our customers have been very positive, seeing the changes underway as beneficial to their needs. And, as I mentioned, their lenders have been highly cooperative as well.

This has been a period of significant change at box, New senior leadership restructuring operational leadership adjustments to our go to market approach and aggressive cost reductions are all going on simultaneously.

I'm incredibly impressed with the positive reaction from our employees, who have embraced the challenge of the new bauxite and responded with creativity renewed dedication.

And certainly our customers have been very positive seemed the changes underway as beneficial to their needs.

As I mentioned, our lenders have been cooperative as well.

Dale Strang: We're convinced we're on the right path with much work still to do. But we have key pieces in place. Let me speak to the near term achievements we anticipate delivering to help drive those sustainable improvements in our operations, particularly first, investors should expect to see a meaningful reduction in operating expenses, positioning us for sustainable profitability. As he indicated, we have already eliminated approximately three million dollars in annualized fixed costs, and there are more to come, not just in the elimination of fixed costs, but in operational efficiencies overall. To be clear.

We're convinced we're on the right path with much work still to do but we have key pieces in place.

Let me speak to the near term achievements, we anticipate delivering to help drive those sustainable improvements in our operations, particularly first.

Investors should expect to see a meaningful reduction in operating expenses positioning us for sustainable profitability.

As he indicated we have already eliminated approximately $3 million in an annualized six gas and there are more to come not just in the elimination of fixed costs, but in operational efficiencies overall to be clear.

Dale Strang: We do see significant opportunities for future growth, and we're committed to investing in the areas that are going to drive those growth opportunities and those results. We're not going to cut costs recklessly, but we also will not spend a nickel more than we need to. Second, we expect to advance initiatives to replace our existing debt with a more permanent facility, either a new debt arrangement or another option to enable us to fund their growth. We also expect to finalize an agreement with our preferred shareholders, directly aligning us with these important stakeholders as we work together to execute this turnaround. Third, investors can expect better sales efficiency as we break down some of the silos that remain from our multiple acquisitions and establish a single market presence that resonates even more clearly with our customers. Finally, we're in the process of introducing several new products across our CleverTouch Mimeo front row brand line. These include industry-leading, highly capable, Google-certified EDLA interactive panels that feature enhanced audio and video.

We do see significant opportunities for future growth and we're committed to investing in the areas that youre going to drive those growth opportunities in those results.

We're not going to cut costs recklessly, we also not will not spend a nickel more than we need to.

Second we expect to advance initiatives to replace our existing debt with a more permanent facility either new debt arrangement or another option to enable us to fund our growth.

We also expect to finalize an agreement with our preferred shareholders directly aligning us with these important stakeholders as we work together to execute this turnaround.

Third.

Can expect better sales efficiency as we break down some of the silos that remain from our multiple acquisitions and establish a single market presence that resonates even more clearly with our customers.

Finally, we are in the process of introducing several new products across our clever touch mimeo Frac program lineup. These include industry, leading highly capable Google certified <unk> at E. L. A.

Interactive panelists that feature enhanced audio and video.

Gregory S. Wiggins: Also, we have new devices coming online that make our legacy panels EDLA-compatible, which is very important to our install-based customers. We've made numerous enhancements to our suite of campus and classroom communication software. These products maintain our technical lead in the marketplace, and they're unique in their integrated solution value. We're the only company that provides the kind of integrated solutions that we're describing here. Most importantly, they're in line with what our customers are asking for. We're confident these solutions will contribute substantially to our improved results in 2024 and beyond. With that, I'll now turn the call over to Greg to discuss the fourth quarter and full year results. Thanks, Dale. And good afternoon, everyone.

Also we have new devices coming online that make the our legacy panels.

Compatible which is very important to our installed base customers. We've made numerous enhancements to our suite of campus in classroom communication software.

These products maintain our technical lead in the marketplace and they're unique in their integrated solutions that we're the only company that provides the kind of integrated solutions that we're describing here.

Most importantly, they are in line with what our customers are acting asking for.

We're confident these solutions will contribute substantially to our improved results in 2024 and beyond.

With that I'll now turn the call over to Greg to discuss the fourth quarter and full year results.

Thanks, Dale and good afternoon, everyone as Dale mentioned Backlights management team is focused on bolstering our balance sheet and reducing our fixed costs before discussing the historic results. Let me speak to these two important initiatives.

Gregory S. Wiggins: As Dale mentioned, Boxlight's management team is focused on bolstering our balance sheet and reducing our fixed costs. Before discussing the historic results, let me speak to these two important initiatives. Boxlight continues to work closely with our lenders with the goal of maintaining our liquidity while seeking a longer-term solution.

It looks like continues to work closely with our lenders with the goal of maintaining our liquidity, while seeking a longer term solution.

Gregory S. Wiggins: To date, our lenders have been very collaborative, and they have expressed appreciation for the recent changes to solidify our foundation. We very much appreciate their ongoing support. Meanwhile, we are working with our investment bankers to identify and evaluate options to replace our debt facility.

To date, our lenders have been very collaborative and they have expressed appreciation for the recent changes to solidify our foundation.

We very much appreciate their ongoing support.

Simultaneously, we are working with our investment bankers to identify and evaluate options to replace our debt facility.

Gregory S. Wiggins: We are communicating regularly with our lenders to keep them apprised of the progress in forging a new facility. We are also actively communicating with our preferred shareholders, and they have indicated a willingness to maintain the status quo in relation to the preferred stock, giving us the runway to execute our turnaround. We appreciate their ongoing support and commitment to helping our company succeed. Given their industry expertise and company insights as the former owners of our Sahara business, we have included them as informal advisors to our board of directors.

We are communicating regularly with our lenders to keep them apprised of the progress in forging a new facility.

We are also actively communicating with our preferred shareholders and they have indicated a willingness to maintain the status quo in relation to the preferred stock, giving us the runway to execute our turnaround we appreciate their ongoing support and commitment to helping our company succeed.

Given their industry expertise and company insights as the former owners of our Sahara business. We've included them as informal advisors to our board of directors. We are confident their guidance will be an asset for us moving forward.

Gregory S. Wiggins: We are confident their guidance will be an asset for us moving forward. From an expense management perspective, we have eliminated approximately $3 million in fixed costs over the last two months, mostly through headcount reductions that do not impact our sales teams or other revenue-generating departments within the organization. These reductions will take time to appear on our income statement, but investors should see the initial benefits in the second quarter, with additional reductions benefiting the balance of the year. I'll now review our fourth-quarter results. Revenues for Q4 2023 were $38.8 million, as compared to $42.8 million for Q4 2022, resulting in a 9.3% decrease. EMEA revenues comprised 52% or $20.2 million of our total revenues, while America's revenues totaled 46% or $17.8 million of our total revenues, and revenues from other markets totaling 2% or $0.8 million of our total revenues.

From an expense management perspective, we have eliminated approximately $3 million and fixed cost over the last two months, mostly through head count reductions that do not impact our sales teams or other revenue generating departments within the organization. These.

These reductions will take time to appear on our income statement, but investors should see the initial benefits in the second quarter with additional reductions benefiting the balance of the year.

I'll now review, our fourth quarter results.

Revenues for Q4, 2023 were $38 8 million as compared to $42 8 million for Q4 2022, resulting in a nine 3% decrease.

EMEA revenues comprised 52% or $22 million of our total revenues, while Americas revenues totaled 46% or $17 $8 million of our total revenues and revenues from other markets totaling 2% or zero point $8 million of our total revenues.

Gregory S. Wiggins: Flat panel displays comprised approximately 71% of total revenues; audio solutions comprised 13% of total revenues, with the balance comprised of device accessories, software, professional services, and STEM solutions. Gross profit for the quarter was $12.3 million as compared to $14.4 million for the prior year period. Gross profit margin for the quarter was 31.7%, which is a decrease of 190 basis points over the comparable three months in 2022. The decline in gross profit margin in Q4 is primarily due to non-recurring adjustments to cost of goods sold, partially offset by higher margins associated with front row products. Our current product margins have remained consistent with prior quarters in 2023, and we expect to return to higher gross margins in Q1 2024. Total operating expenses for Q4 2023 were $28.9 million, inclusive of $12 million of non-cash impairment charges. In addition, the company recognized incremental non-cash stock compensation expense of approximately $600,000 for the cancellation of certain previously issued equity awards, excluding the non-cash impairment charges and incremental stock compensation expense.

Flat panel displays comprised approximately 71% of total revenues audio solutions comprised 13% of total revenues with the balance comprised of device accessories software professional services and stem solutions.

Gross profit for the quarter was $12 3 million as compared to $14 4 million for the prior year period.

Gross profit margin for the quarter was 31, 7%, which is a decrease of 190 basis points over the comparable three months in 2022.

The decline in gross profit margin in Q4 is primarily due to nonrecurring adjustments to cost of goods sold partially offset by higher margins associated with front row products are.

Our current product margins have remained consistent with prior quarters in 2023, and we expect to return to higher gross margins in Q1 2024.

Total operating expenses for Q4, 2023 were $28 9 million inclusive of $12 million of noncash impairment charges. In addition, the company recognized incremental noncash stock compensation expense of approximately 600000 for the cancellation of certain previously issued equity awards.

Excluding the noncash impairment charges and incremental stock compensation expense total operating expenses were approximately $16 3 million compared to $15 2 million in Q4 2022.

Gregory S. Wiggins: Total operating expenses were approximately $16.3 million compared to $15.2 million in Q4 2022. The increase was due primarily to increased employee-related expenses to support the company's growth in certain markets. Other expense for Q4 2023 was a net expense of $2.6 million, as compared to a net expense of $1.6 million for Q4 2022. The increase in other expense was primarily due to fluctuations in the gain or loss recognized from the change in fair value of the derivative liability. The company reported a net loss of $16.6 million, or $1.76 per basic and diluted share for the quarter, as compared to a net loss of $2 million, or $0.25 per basic and diluted share for the prior year quarter.

The increase was due primarily to increased employee related expenses to support the company's growth in certain markets.

Other expense for Q4, 2023 was a net expense of $2 6 million as compared to net expense of $1 6 million for Q4 2022.

The increase in other expense was primarily due to fluctuations in the gain or loss recognized from the change in fair value of derivative liabilities.

The company reported a net loss of $16 6 million or $1 76 per basic and diluted share for the quarter as compared to net loss of $2 million or 25 cents per basic and diluted share for the prior year quarter.

Gregory S. Wiggins: Adjusted EBITDA loss for Q4 2023 was $1.1 million, as compared to adjusted EBITDA income of $2.6 million for Q4 2022. Adjustments to EBITDA include stock-based compensation expense, impairment charges, gains and losses from the remeasurement of derivative liabilities, gains and losses recognized upon the settlement of certain debt instruments, and the effects of purchase accounting adjustments in connection with recent acquisitions. For full year 2023, adjusted EBITDA was $12.6 million as compared to $18.9 million for the prior year. Turning to the balance sheet at December 31st, 2023, Boxlight had $17.3 million in cash, $54.1 million in working capital, $44.1 million in inventory, $158.6 million in total assets, $40.2 million in net of debt issuance costs of $3.1 million, and $16.8 million in stockholders' At December 31st, Boxlight had 9.7 million common shares issued in outstanding and 3.1 million preferred shares issued in outstanding.

Adjusted EBITDA loss for Q4, 2023 was $1 1 million as compared to adjusted EBITDA income of $2 6 million for Q4 2022.

Adjustments to EBITDA include stock based compensation expense impairment charges gains or 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.

For full year 2023, adjusted EBITDA was $12 6 million as compared to $18 9 million for the prior year.

Turning to the balance sheet at December 31, 2023 box light at $17 3 million in cash and $54 1 million in working capital $44 1 million in inventory $158 6 million in total assets $40 2 million in debt net of debt issuance cost of $3 1 million and $16.

8 million in stockholders equity.

At December 31 box light had $9 7 million common shares issued and outstanding and $3 1 million preferred shares issued and outstanding <unk>.

Gregory S. Wiggins: Subsequent to year end, the company paid down $1.6 million in principal on its term loan, with the principal balance currently at $41.7 million. Looking ahead to 2024, the company is expecting full-year revenues to remain flat year-over-year with a continued return to traditional seasonal trends. For Q1 2024, the company expects revenues of approximately $34 million and to approximate 18 to 20% of total annual revenue. While the company has not observed significant product margin decline in recent periods outside of the non-recurring charges in Q4 previously discussed, we are forecasting a 100 to 200 basis point decline in gross margin percentage for full year 2024 as the flat panel market continues to mature. Managing operating expenses, primarily controlling or fixed G&A costs to align with forecasted revenues, remains a primary focus for 2024. In January, the company eliminated approximately 25 positions, primarily in non-sales roles, which we estimate will save the company approximately $3 million on an annual run rate basis.

Subsequent to year end the company paid down $1 6 million in principal on its term loan with a principal balance currently at $41 7 million.

Looking ahead to 2024 the company is expecting full year revenues to remain flat year over year, whether they continued return to judicial seasonal trends for.

For Q1 2024, the company expects revenues of approximately $34 million into approximate 18% to 20% of total annual revenues. While the company is not observed significant product margin decline in recent periods outside of the nonrecurring charges. In Q4 previously discussed we are forecasting a 100 to 200 basis point decline in gross margin percentage for full.

The year 2024, as the flat panel market continues to mature.

Managing operating expenses, primarily controlling our fixed G&A cost to align with forecasted revenues remains a primary focus for 2024 in.

In January the company eliminated approximately 25 positions primarily in non sales roles, which we estimate will save the company approximately $3 million on an annual run rate basis other cost saving measures, including further reductions in employee related expenditures are in process and we look forward to updating you with our progress on future calls the <unk>.

<unk> is committed to reducing operating expenses to approximately 12, five to 13 million per quarter on an annual basis and expects to begin achieving new quarterly run rates by the end of 'twenty 'twenty four.

Operator: Other cost-saving measures, including further reductions in employee-related expenditures, are in the process, and we look forward to updating you with our progress on future calls. The company is committed to reducing operating expenses to approximately $12.5 to $13 million per quarter on an annual basis and expects to begin achieving new quarterly run rates by the end of 2024. We are forecasting adjusted EBITDA for Q1 2024 after giving consideration to severance and other charges associated with our recent headcount reduction of negative $3 million. Managing our debt and equity structure is also a top priority for the company in 2024. We are actively seeking to refinance our debt facility with more favorable terms while maintaining a healthy EBITDA leverage ratio. We continue to monitor our short-term working capital cash requirements to ensure we have appropriate levels of inventory on hand for future periods. While we may look to obtain liquidity to meet these working capital needs, we are focused on achieving solutions that are not diluted to our shareholders. With that, we'll open up the call to questions. Thank you.

We are forecasting adjusted EBITDA for Q1, 2024, after giving consideration to severance and other charges associated with our recent head count reduction of negative $3 million.

Managing our debt and equity structure is also a top priority for the company in 2024, we are actively seeking to refinance our debt facility with more favorable terms, while maintaining a healthy EBITDA leverage ratio.

We continue to monitor our short term working capital cash requirements to ensure we have appropriate levels of inventory on hand for future periods. While we may look to obtain liquidity to meet these working capital needs. We are focused on achieving solutions that are not dilutive to our shareholders.

With that we'll open up the call for questions.

Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

You May press star two if he would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Once again, please press star one if you would like to ask a question one moment. Please while we poll for questions.

Operator: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone. A confirmation tone will indicate your line is in the question. You may press star 2 if you would like to remove your question.

On the first question today is coming from Brian can singer from Alliance Global Brian Your line is live.

Great. Thanks for all the comments.

In your prepared remarks, it actually in the press release, you mentioned the customers' needs are changing and the market's evolving their companies and making changes to online with that changing market.

Brian David Kinstlinger: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. Again, please press the star key if you would like to ask a question. Brian E. Great, thanks for all the comments. In your prepared remark, actually in the press release, you mentioned customers' needs are changing, and the markets are evolving, and your companies are making changes to align with that changing market. What are the changes customers are asking for? Is it new products?

What are the changes customers are asking for is it new products is going to require new M&A new personnel, it and how much capital will it take to meet to make these adjustments.

Hey, Brian This is Dale and thank you.

Well I think there's a lot of pieces to that as to how the customer needs are evolving a couple of ways. We're responding just today that we see as being quite timely.

Dale Strang: Is it going to require new M&A, new personnel? And how much capital will it take to meet these adjustments? Hey, Brian, this is Dale.

The the panels themselves are evolving into a much more highly functional.

Dale Strang: And thank you. Look, I think there's a lot of pieces to that as to how customer needs are evolving. A couple ways we're responding just today that we see as being quite timely are the panels themselves are evolving into much more highly functional, almost computer devices that have responded to much more in the way of much more productivity software that the educators use every day. And it's making it easier for them to interact directly with the panels as opposed to using a Chromebook or another intermediate device. So it's super important to the customers that are sort of leading the way on this that they understand how to use these devices, that they have devices that are certified by Google's EDLA program, and that they can receive training to make sure that their customers get the most out of them. Our new batch of EDLA panels has all that, and we're one of the very few people in the market that can offer EDLA-certified panels.

Computer devices that have resident on a much more in the way of the much more productivity software.

Carriers use every day, and it's making it easier for them to interact directly with the panels as opposed to using a.

A chromebook or another intermediate device, so it's super important to us.

The customers that are sort of leading the way on this that they they understand how to use these devices that they have devices that are certified by Google's <unk> program and that they can receive training to make sure that their customers get the most out of them.

Our new our new batch of Vitiello DLA panels have all that in we're one of the very few people in the market that can offer that it offers <unk> certified.

Panels and we have.

Dale Strang: And we have the, and we offer specific training on both the panels overall, the Google stuff in general, and specific applications that others can't provide. Again, this is what customers are looking for, not only the technology, but the backing and the knowledge on how to use it. Another aspect that's really, we think, coming to the fore is that it's not just about front of classroom instruction any longer, more and more of our districts are looking at classroom wide or campus wide communications and, That's where our front row product line comes in, by integrating our front row line of audio products and services with video, we can not only improve instruction and make that much more meaningful and much more impactful, but we can also tie into the building-wide and campus-wide communications that are increasingly important in the context of safety, and that's opening up whole new conversations for us.

And we offered specific training on both of the panels overall, the Google stuff in general and.

And specific applications that that others can't provide again this is what what customers are looking for not only the technology, but.

The backing and the knowledge on how to use it another aspect that's really we think coming to the fore and it's not just about front of classroom instruction any longer.

More and more of our districts are looking at classroom wide or campus wide communications and.

That's where our front row product line comes in by integrating our front line of audio.

Products and services with with video, we cannot only improve instruction and make that much more meaningful and much more impactful, but we can also tie into the building wide Campuswide communications that are increasingly important.

The context of safety.

Thats opening up whole new conversations for US again this is what what more and more people are looking for and we're lucky that we that we have.

Dale Strang: Again, this is what more and more people are looking for, and we're lucky that we have an asset base in the front row that can really respond. Long term, there's much so to answer your question about M&A, I think it's one of the reasons we want to make sure that we built the company through M&A. Our company is, is, is where it is today because of that. We think that it's going to be a very opportunity-rich environment for augmentation. And you don't have to look very far for the technology drivers that are going to make that happen, AI being the current one.

And asset base in front row that can that can really respond.

Long term, there's there's much so to answer your question about M&A.

I think if we believe it's one of the reasons, we want to make sure that we built the company through M&A Our company is.

Is where it is today because of that.

We think it's.

It's going to be a very opportunity rich environment for for augmentation and if you don't have to look far for the technology drivers that are going to they're going to make that happen AI being the current one.

Gregory S. Wiggins: And so by having our operation be well integrated and highly efficient, it'll just position us to take advantage of those opportunities as they emerge. And then, can you speak to the order trends thus far in the March quarter? Have they picked up from the December quarter? I guess the heart of the question is, what gives you confidence, given the recent trends, that you can generate flat year-over-year revenue? Yes, a couple things. Go ahead, Greg.

So by having our operation be well integrated and highly efficient it'll just position us to take advantage of those opportunities as they emerge.

Great.

And then can you speak to the order trends thus far in the March quarter have they picked up from the December quarter I guess the heart of the question is what gives you confidence given the recent trends that you can generate flat year over year revenues.

Yeah. That's helpful. Thanks. Okay go ahead, Greg Yes. It may provide a couple a couple of data points here.

Gregory S. Wiggins: Yeah, so maybe provide a couple, a couple data points here, you know, so as we talked on our last earnings calls, we were kind of heading in, you know, kind of the latter part of the year, you know, we've gone through multiple quarters, four quarters or so down, year over year sales order results. And in Q3, you might remember, we actually saw a slight uptick in sales orders, roughly 10% for the quarter. And, you know, that revenue increased slightly, about 3% globally in Q4, with our EMEA business actually increasing in sales orders partially offset by or offset by some of our US sales orders.

As we talked on our last earnings calls, we were kind of heading in.

You know kind of in the latter part of the year again, we'd gone through multiple quarters four quarters yourself down year over year sales on our results and in Q3, you might remember, we actually saw a slight uptick in sales orders roughly definitely 10% for the quarter and you know that decreased slightly about three.

Per cent globally.

In Q4 with our EMEA business.

Actually increasing in sales orders, partially offset by or offset by some of our U S sales orders.

Gregory S. Wiggins: The early indications in Q1 have actually pointed to some positive signs, maybe a very, very modest return to order growth in the US as well. So we're seeing sporadic data points, but certainly a positive change from where we were in the four quarters kind of heading into Q3. So we're starting to see those data points that start to indicate, you know, a turnaround in the industry as well as, you know, our discussions that we have in the industry as well. So I think those data points align as well. And Dale, I know you wanted to add something.

But the early indications in Q1 had actually pointed to some positive.

Signs that maybe its very very modest return of order growth in the U S. As well so we're seeing a sporadic data points, but certainly a positive change from where we were in the four quarters kind of heading into Q3, So we're starting to see those.

Data points, you know that start to indicate.

As a turnaround in the industry as long as well as.

Our our discussions that we have in the in this industry as well. So I think that those data points are all aligned as well and they're all I know you want to add something.

Dale Strang: Oh, I think that I just want to emphasize two things. One is the focus we've put on really grinding out our forecasting accuracy. It has been intense, and it will continue to be. We recognize it's important to us and to our stakeholders for us to commit to a number and hit that number. That has always been tough to do in this market because it's a difficult to forecast market. And it tends to be kind of lumpy in terms of, you know, you get big orders, and then the order gets pushed. But we're committed, nevertheless, to make that happen, to make sure that we have an accurate number. On a global basis, again, the pandemic spiked what was traditionally a kind of slow and steady growth market into an intense period of growth.

Oh I think.

I just want to emphasize two things one is the focus we've put on.

On really grinding out our forecasting accuracy has been intense and it will continue to be we recognize it's important to us and to our stakeholders for us too.

Commit to a number and hit that number that has always been tough to do in this market because it's difficult to forecast market.

It tends to be kind of lumpy in terms of you get big orders and then the origins pushed but we're committed nevertheless to make that happen to make sure that we have an accurate number.

On a global basis again, the pandemic spiked what was traditionally a kind of slow and steady growth market into a intense period of growth.

Dale Strang: And since the pandemic, there's been a sort of negative hangover there that's had a downturn that is unnatural in its cyclicality over time. And one of the things we're focusing on really tight is the seasonality represented by each quarter. The early signals from that data and from the anecdotal data from the field indicate that, right now, our flat revenue outlook for the year is sound, but we'll obviously stay right on top of it. I'm not sure if that answers your question. It does indeed. No, it doesn't.

And the sense of the pandemic, there's been a sort of negative hangover. There that's had a downturn that is a natural.

Cyclicality overtime.

One of the things, we're focusing on really tight.

Is are there.

The seasonality represented by each quarter the early signals from that data and from the anecdotal data from the field indicate that that are right now that are that are flat revenue.

Outlook for the year is sound, but we'll obviously stay right on top of it I'm not sure if that answers your question.

It does note there thank you.

Brian David Kinstlinger: Thank you. The last question I have is, I hear you guys right with the cost cutting and future potential cost cutting. Gil, you talked about where you would exit the year at a GNA level and, based on the first quarter adjusted EBITDA, lost guidance. We're not seeing much of that, is what I said. And with the order trends, I sense the second quarter also will probably be breakeven to a loss too, given the third quarter is where most of your revenue is generated. So I'm wondering if there's anything to think about from a covenant that we should be mindful of.

The last question I have if I'm hearing you guys right with the cost cutting.

And future potential cost cutting your you talked about where you would exit the year at a G&A level and based on our first quarter adjusted EBITDA loss guidance.

Were not seen much of that is what I said.

And with the order trends since the second quarter also will probably be breakeven to a loss to given.

Given the third quarters, where most of your revenue is generated so I'm wondering if there.

Theres anything to think about from a covenants that we should be mindful of.

Yeah.

Gregory S. Wiggins: Yeah, so a couple of thoughts there that we need to address. So yeah, throughout the year, there will be a little lumpiness in our OPEX savings, and we can we can speak a little more closely to the first quarter. And, you know, certainly, as you indicated, where we want to be by the end of the year, where we anticipate being at the end of the year, is kind of our future run rate of that twelve and a half, thirteen million of OPEX per quarter. In the first quarter, you're, you're correct with some of the other restructuring charges that have gone into some of the changes we've made. And as you know, when a significant number of the changes made were headcount related, there's, there's some costs that offset some of the immediate savings that won't be really realized until we get into Q2, Q3. Also, you know, there are other initiatives, as we kind of alluded to in our prepared remarks, you know, that this is an ongoing process. So there are further changes to be made, and the timeframe in which some of those are executed will certainly impact the timing of those reductions in Q2, Q3.

Yeah. So.

Couple of thoughts there that are to address so yeah. It throughout the year, there will be a little lumpiness in our on our Opex savings. We can we can speak a little more closely to the first quarter.

And certainly as you indicated where we want to be by the end of the year, where we anticipate.

Despite being at the end of the year is kind of our future run rate of.

<unk> 12, and a half $13 million of opex per quarter in.

In the first quarter, you're you're correct with some of the other restructuring charges that they have gone into some of the changes we've made and as you appreciate when a significant number of the changes made were head count related. There's there are some costs that offset some of the immediate savings.

It won't be really realized until we get into Q2 Q3 are also you know there are other initiatives is as we kind of alluded to in our.

In our prepared remarks that this is an ongoing process.

So there for further changes to be made and the.

The timeframe in which some of those are executed will certainly.

No impact the timing.

You know that those reductions in Q2 Q3 so.

Operator: So we've stopped short of providing full year guidance at this time, you know, on where we'll land for the year. But obviously, for Q2, Q3, you know, you know, we'll be gradually, you know, working toward kind of our new run rate by the end of the year. From a debt compliance standpoint, you know, say we are obviously, you know, you know, focused on refinancing our current credit facility. But we also continue to work with, you know, our existing lenders on covenant compliance as far as our existing agreement is concerned. And, you know, we continue to kind of have those those discussions with them as we progress through the year. Okay, thank you. Good luck! Thank you. And once again, it is star number one on your phone.

We've stopped short of providing full year guidance at the at this time, you know on on where we'll land for the year.

But obviously for Q2 Q3.

It will be gradually.

Working towards kind of a new run rate by the end of the year.

So from a from a debt compliance standpoint.

I would say we are obviously.

You know focused on refinancing our current credit facility.

But we also are continuing to work with our existing lenders you know.

With covenant compliance as far as our existing agreement as it.

It is concerned and.

They kind of have those discussions with them as we progressed through the year.

Okay. Thank you good luck.

Thank you and once again it is star one on your phone if you wish to ask a question star one if you wish to enter the Q&A queue.

Operator: If you wish to ask a question, star one. If you wish to enter, the next question is coming from Jack Van, Maxim Group, Jack Urlein. Okay, great. Thanks, Dale. Thanks, Greg. Just a couple questions to follow up.

And the next question is coming from Jack Vander Ark from Maxim Group Jackie Your line is live.

Okay, great. Thanks, Dale Thanks, Greg.

Just a couple of questions to follow up.

Jack Vander Aarde: Dale, can you talk a little bit more about your 2024 revenue outlook, which is for roughly flattish growth, but in terms of geography, are you kind of expecting flattish growth across the board or any puts and takes there, whether it be the US market, EMEA, or some of the other growth markets you've been gaining share in? Is it kind of a blanketed just kind of flattish, or are any markets expected to outperform and others to be kind of laggards? Thanks.

Can you talk a little bit more about your 2020 for revenue outlook, which is for roughly flattish growth, but in terms of geography.

Ah you're kind of expecting flattish growth across the board or any any puts and takes there whether it be the U S market EMEA are right some of the other.

Growth markets, you've been gaining share in.

Is it kind of a blanket and then just kind of flattish or any any market is expected to outperform and others to be kind of laggards. Thanks.

Dale Strang: It's, it's tough to say, but thank you, Jack. Yeah, it's tough to look at EMEA and say it and look at that as a blanket, right? Our two biggest markets are naturally the US and the UK. We're seeing pretty sharp growth on a maybe smaller base in markets like Germany, which is someone we invested in pretty aggressively over the last couple years, and we're seeing some real results there. And we're also seeing growth, not just by geography but by sector, meaning we think that our front row business will grow nicely this year, and that contributes to the U.S. result.

It's it's tough to say, but thank you Jack.

Yeah.

It's tough to look at EMEA, and say and look at that as a blanket right.

Our two biggest markets are naturally the U S and the UK.

We're seeing.

Pretty sharp growth.

Maybe smaller base in the markets like Germany, which is if somebody we invested pretty.

Pretty aggressively over the last couple of years and we're seeing some real results there.

And.

We're also seeing growth not just by geography, but by sector, meaning we.

We think that our front row business will grow nicely this year and that contributes story as a result, I will say this the.

Dale Strang: I will say this, the overall blended basis on EMEA looks like it's got more, more, it's maybe having a little less of the continued softness overall on a blended basis when you average everything else, whereas the panel market in the U.S. is still looking, you know, flat to down. But if we hit the number that we're talking about hitting, it'll be because of all those factors. It'll be that we take some market share, that the market will perform well in certain markets, and we'll blend in, you know, products like our STEM product, our training services, and our audio product to achieve the result. It's also worth noting that the U.S. is not monolithic either, right?

Overall, the blended basis in EMEA it looks like it's got more <unk>.

More.

It's maybe having a little less of the continued softness.

Overall, our blended basis, when you average everything else, whereas the panel market in the U S is still looking.

Flat to down.

But if.

If we hit the number that we've talked to you about hitting it'll be because of all those factors. So it'll be it will take some market share that the market will perform well in certain markets and will will blend in.

Products like our stem products, our training services and our.

In our audio product.

To achieve the result, it's also worth noting that the U S is not monolithic either right, we're seeing really strong performance.

Gregory S. Wiggins: We're seeing really strong performance in certain states that are growing quickly, as you'd expect, and those states will continue to perform really well. Again, Jack, I'm not sure if that covers it, but globally, the market is going to remain relatively flat. We think that we're covered pretty well in all the areas where we can get growth, the sub areas where we can get growth this year. And we're aggressively working on filling any white space we have to make sure that we, you know, we grab the business where it is. Okay, great. No, that that's that covers a lot of that thing. I appreciate that. And then maybe, maybe a follow-up for Greg and Gail; maybe you can contribute to this as well.

Performance in certain.

The states that are growing quickly as you would expect and.

Those states will continue to perform really well again, Jack I'm not sure if that covers it but globally.

Globally. The market is going to remain relatively flat, we think that were covered pretty well in all the areas, where we can where we can get.

Growth of sub areas, we can get growth this year.

And we're aggressively working on filling in white space, we have to make sure that we have.

The business, where it is.

Okay great.

That covers a lot of that I think I appreciate that and then maybe maybe a follow up for Greg and Dave maybe you can.

Contribute to this as well, but just on the cost reduction front and kind of go forward goal I believe I heard you are targeting maybe I know there is seasonality involved but when all of a sudden done maybe a 12 to 13 million kind of normal normalized quarterly Opex do you just have a sense of you know.

Gregory S. Wiggins: But just on the cost reduction front and kind of go forward goal, I believe I heard you're targeting maybe another seasonality involved, but you know, when all said and done, maybe a 12 to 13 million kind of normal normalized quarterly OPEX. Do you just have a sense of what kind of a normalized or targeted adjusted EBITDA margin looks like? It sounds like gross margin might be, you know, stepping down 100, 150 bps, maybe or so, but it still remains pretty strong relative to historical levels. And so further OPEX cuts, just wondering, like, what is the kind of normalized profit or adjusted EBITDA margin in your eyes, if you could speak to any of that?

Well, what what kind of a normalize our target adjusted EBITDA margin looks like it sounds like gross margin might be.

You know stepping down 100 to 150 bps Navy or so, but still remains pretty strong relative to historical levels and so further opex cuts just wondering like what is kind of a normalized profit our adjusted EBITDA margin in your eyes, if you could speak to any of that thanks.

Gregory S. Wiggins: Yeah, so I think on a go forward basis, on a full run rate, after, you know, we start to achieve these operating expense reductions that we plan to put in place this year, our goal is to achieve a digestible margin north of north of 10%, which we think is able to be accomplished. And, you know, a lot of the operating expense reductions that we want to put in place this year are based on, you know, we've noted on the call at a flat, you know, to flat year over year revenue. We, we expect, you know, this to be an industry that we're in. You know, we'll experience, you know, some modest growth over time, but even on a flat revenue basis, we think with these operating expense reductions, all things being considered, we can achieve a double-digit even margin and sustain that going forward. Okay, great. That's helpful. And then maybe just one more question for me.

Yeah, So I think on a on a go forward basis.

Full run rate after we start to achieve these operating expense reductions that we plan to put in place this year.

Our our goal is to achieve an adjusted EBITDA margin north of north of 10% sustaining a sustained tomorrow.

Margin north of 10%, which we think is is able to be accomplished and you know a lot of the operating expense reductions we want to put in place. This year are based as we've noted on the call at a flat.

Flat year over year revenue.

You know, we we expect this to be an industry that work.

We will experience some modest growth you know overtime.

But even on a flat revenue basis, we think that with these operating expense reductions all things being considered weekend, we can achieve a double digit EBITDA margin and and and and sustain that going forward.

Okay, Great. That's helpful. And then maybe just just one more question from me.

Dale Strang: Just because there's a press release on it and everything. Dale, can you can you touch on the new CleverTouch headquarters and warehouse? I believe it's, you know, someone in the press releases, it's much larger, 35% bigger. Just how does that impact sort of? I guess that plays nicely into, you guys are going through cost cutting initiatives, and you expect growth to pick up down the road. You know, what was the decision behind that?

Just because there was a press release on it everything Dale can you can you touch on the New club protect headquarters in warehouse I believe with some of the press release says it's much larger 35% bigger.

Just how does that impact sort of.

I guess that plays nicely into you know you guys are going through cost cutting initiatives and expect growth to pick up down the road.

You know what what was the decision behind that and it is.

Dale Strang: And is that fair to say it kind of validates and reinforces your confidence and growth to pick up in the back half of the year just down the road so you can satisfy it? Yeah, sure. The places It's I was happy enough to be there. I think on the second day we were open, and it's really a vast improvement over what we had before, and most of that is just about consolidation and efficiency. Just if you've ever run a warehouse, which I have not, but I've spoken with people who have, just the ease with which repetitive tasks can be repeated can really add up to a lot of logistical improvements. And this is a state-of-the-art warehouse with plenty of room for ebbs and flows of inventory levels. It's infrastructure-wise, it's placed ideally near the transportation centers there outside of London, and it's also a more effective workplace for the people compared to, for our staff members compared to the prior place. So we're excited about it. We think it benefits both efficiency and in terms of a kind of productivity, if you will.

Fair to say, it's it kind of validates reinforces our confidence in growth to pick up in the back half of the year just down the road. So you can satisfy it yes.

Yeah sure. The places it's I was happy enough to be there I think on the second day, we were open and it's really.

It's a vast improvement or what we had before and most of that is just on.

You know consolidation and efficiency, just if you've ever run a warehouse, which I have not but I've spoken with people who have.

Just the the ease with which are repetitive tasks can be can be repeated.

And really add up to a lot of a lot of logistical improvements and this is a state of the art warehouse with plenty of room.

Or ebbs and flows of inventory levels.

Infrastructure wise its place ideally.

Near near the transportation centers, there outside of London and.

It's also a a.

More effective workplace for the people compared to our staff members compared to the prior place. So we're excited about it.

We think it has some benefits both of efficiency.

And in terms of the.

Kind of productivity, if you will but it.

Dale Strang: But we committed to it based on the expectation of future growth, and we're set for that. Okay, great. That's it for me, guys. Thank you. There were no other questions at this time.

We committed to it based on the expectation of future future growth and we are set for that.

Okay, Great. That's it for me guys. Thank you.

Thank you there are no other questions at this time I would now like to hand, the call back to Dale Strang for closing remarks.

Dale Strang: Calls back to Dale Strang for closing. Well, thank you everyone for your support and for joining us today on our fourth quarter 2023 conference call. As I mentioned, the pieces for meaningful improvement are in place, we have a clear understanding of the challenges we need to address, and a plan in place to drive improvements. I'm incredibly proud of the team for responding to the challenges and operating with both professionalism as well as energy and creativity, and we look forward to speaking to you again in May when we report our Q1 2024 results. Thank you. This does conclude today's conference. You may disconnect your lines at this time. Department

Well. Thank you everyone for your support and for joining US today on our fourth quarter 2023 Conference calls I mentioned the pieces for meaningful improvement or in place we have a clear understanding of the challenges we need to address in a plan in place to drive improvements I'm incredibly proud of the team responded to the challenges in operating with both professionalism as well.

His energy and creativity and we look forward to speaking to you again in May when we report our Q1 2024 results.

Thank you. This does conclude today's conference you may disconnect. Your lines at this time have a wonderful day. Thank you for your participation.