Boxlight Corporation

Thank you and welcome to the BoxLight fourth quarter and full year 2020 earnings conference call. By now, everyone should have access to the press release issued this afternoon. This call is being webcast and is available for replay. The remarks today will include statements that are considered forward-looking within the meaning of securities laws, including forward-looking statements about future results of operations, business strategies, and plans, customer relationships, market trends and potential growth opportunities. In addition, management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current knowledge and expectations as of today and are subject to certain risks and uncertainties and may cause the actual results to differ materially from the forward-looking statements. a detailed discussion of such risks and uncertainties are contained in the company's most recent Form 10-K, Form 10-Q, and other reports filed with the SEC. The company undertakes no obligation to update any forward-looking statements. On this call, management will refer to non-GAAP measures that when used in combination with GAAP results provide additional analytical tools to understand the company's operations. The company has provided reconciliations to the most directly comparable GAAP financial measures in the earnings press release, which will be posted on the investor relations section of the company's website and investors.boxlight.com. And with that, I will hand the call over to BoxLight's Chairman and Executive Chief Officer, Michael Pope.

Good afternoon, everyone, and thank you for joining our fourth quarter and full year 2020 earnings call. Despite the COVID-19 pandemic that has caused challenging disruptions to traditional communication in both education and business settings, we closed the fourth quarter with record customer orders and outperformed our revenue and earnings guidance. For the quarter, we reported customer orders of $33 million, revenues of $32 million, and adjusted EBITDA of positive $400,000. We also ended the year with $11 million in back orders, the strongest pipeline in our history for both the U.S. and EMEA, and a healthy balance sheet including $13 million in cash, $21 million in working capital, and $45 million in stockholders' equity. We are seeing an increased demand for our solutions this year, and we expect to report the first quarter of 2021 with revenue greater than $28 million and positive adjusted EBITDA. Although we will not be providing guidance at this time for the full year 2021, note that the first quarter is seasonally slow and has historically accounted for less than 20% of our annual sales. We are benefiting from a robust and growing market for interactive hardware and software solutions with increased spending in both the education and corporate sectors. Education systems in particular are accessing large budget allocations for technology supported by substantial government funding as they outfit classrooms with solutions for virtual, hybrid and traditional learning. As a company, we see a unique opportunity to take advantage of this expanding market and capture additional market share by optimizing our sales channel and promoting our best-in-class solutions and exceptional customer support. In September of 2020, we acquired Sahara Presentation Systems, our most significant acquisition to date with a purchase price of approximately $74 million. I'm happy to report that the integration has been overwhelmingly seamless, and we are reaping the benefit of our global scale, additional seasoned leadership, expanded product suite, combined sales channel, and dramatically improved financial position. Our five-member executive team today includes three executives from the Sahara transaction, namely Mark Starkey as president and head of global sales, Pat Foley as chief financial officer, and Shaun Marklew as Chief Technology Officer. You will hear from both Mark and Pat during our remarks today. Although we are headquartered in Atlanta, Georgia, we are a global company with nearly 200 employees of which approximately 100 are positioned throughout Europe and countries including the United Kingdom, Germany, Holland, Sweden, Finland and Belgium. We are also supported by thousands of representatives globally through our distributors and reseller partners, which promote our range of solutions to the education, corporate, and government verticals. We have sold our award-winning CleverTouch, Mimeo, and BoxSight brands into many of the largest organizations and education systems worldwide. Earlier this week, we announced the acquisition of our CleverTouch distributor in Belgium and Luxembourg, extending our footprint in Europe. This transaction is part of a broader strategy to both improve our profit margins and maintain stronger relationships with our reseller channel and end users. We have closed 10 acquisitions as a company since 2016 and will continue to be acquisitive with a focus on geographic expansion. However, our primary focus as a company is to take advantage of the current market conditions and our unique offering to drive strong organic growth. With that, I will now turn the call over to our president, Mark Starkey, to provide additional color on our sales efforts for the quarter.

Thank you, Michael. And I'm calling in today, tonight, from a very dark London. So, hello, everyone. It certainly is an exciting industry, and I would like to reiterate your point about how smooth the integration of the Sahara business into BoxLight has been. It literally could not have gone any better. I would also like to take this opportunity to thank all our staff and customers who have helped contribute to our success in Q4. During the fourth quarter, we booked over $33 million in orders from our partners. That represents a 453% growth in order intake year on year. Some of our key orders included $4.2 million from D&H in the US, $2.8 million from Trox in the US, $2.8 million from our partner in Denmark, UnitDK, $1.6 million from our partner in Australia, ASI $1.3 million of orders from our partner in France, Speechy $1.2 million of orders from Tierney in the US $807K from our partner in Spain, Charmex and $668,000 from one of our partners in the US, IDNS to highlight just a few It is worth noting that in some countries such as Australia Denmark, Spain and France. We have a single distributor running the territory, but in other key markets such as the US, UK and Germany, we run our own channel with many resellers. We have over 1000 active partners globally, including approximately 500 in the UK, over 300 in the US and over 70 in Germany. During Q4 per future source consulting, We retained the number one market share position for Interactive Flat Panels in Australia and Denmark. Overall, our Q4 market share in EMEA was 6.6% of the IFPD market, just behind Samsung who had 7.7% market share. The IFPD market in EMEA is currently worth $1.26 billion per annum. The US market for IFPDs is marginally bigger than EMEA at $1.27 billion, and our Q4 market share was 6.1%. This represents a significant growth in market share for BoxLight, and our ambition is to be a top three spot in both EMEA and the US in the very near future, with our ultimate goal to take the number one spot. To put that into context, we would need to have approximately 15% market share of IFPDs in a market currently worth approximately $2.5 billion in order to take the top three spot. In addition to IFPDs, we are also growing in other product categories, including software, such as our SaaS-based Mimeo Connect platform, STEM, professional services, and accessories, all of which have high growth expectations and deliver high margins. The total EdTech market is worth in excess of several hundred billion dollars, and there is huge room for us to grow within this market. Outside the US and EMEA, our Latin American business is growing through key partners in Puerto Rico, Colombia, Peru, and Costa Rica. In Australia, we have grown from almost nowhere to become the number one brand in IPDs over the past 18 months. In Asia, we are developing opportunities with partners in Singapore, Vietnam, Thailand, and Indonesia, predominantly in the private school sector. In Africa, we have a strong partnership with a distributor in South Africa called Interactive AB Solutions, who is actively selling our solutions across Namibia, Botswana, Beek, Nigeria, and Ethiopia. In terms of end users, We had literally hundreds of fantastic wins across the globe from Australia to Austria and Europe. From the UAE in the Middle East to the USA and from Sweden to Russia. One notable win was at Shelby County in Kentucky. The customers saw the value in our clever share, software suite and clever message solutions which differentiated us from the competition. We also had another great win at Sundown ISD in Northwest Texas. the district stated that the reliability and ease of use along with the clever message and clever share were key factors in choosing our CleverTouch solution. In Germany, our revenue in Q4 grew at 195% year on year and we won many orders but a couple stand out. In particular, a project with our partner Bactel to supply a UX Pro solution to the German army. We also won another project in Germany with our partner Video Tom Stein to supply our solutions into the German government. In EMEA, approximately 14% of our Q4 revenues were sold to non-K12 end users such as healthcare, government and corporate organizations in sectors such as financial services, manufacturing and retail. Typically, our corporate revenues would be at least 20% of total revenue in EMEA, but this sector has been widely impacted by COVID during 2020 compared with the education sector. The reason that this is so important is that the gross margin achieved on our corporate sales is much higher, achieving 45% on average in Q4. Given that the higher margins achieved in corporate and the fact that we believe the non K-12 opportunity is significant, we have decided to launch a dedicated sales team in the US with a sole focus of developing these market opportunities. This team will be led by Dan Deem, SVP of Corporate Sales in the US. Prior to Dan joining us in September last year, he spent three years as Senior Director of Visual System Sales at Panasonic. We look forward to sharing the progress of this team in the future as the economy starts to reopen, and our solutions, which are ideally suited to work with the likes of Zoom, Teams, and Cisco WebEx, begin to gain traction in the US market. Our strategic partnership with Samsung has continued to progress over the last several months. We have developed our Mimeo Connect software so that it can be deployed directly on Samsung's Tizen operating system, and we expect that all Samsung IFPDs in the education market will ship with the Mimeo Connect companion app from this summer. We have also developed a go-to-market plan with Samsung so that both sales teams have the ability to sell the solution into the channel. This has not been a quick task as changing the go-to-market sales processes within Samsung, a $200 billion company, is complex and has taken a huge amount of effort over the past six months. I am pleased to announce that the systems have now been put in place and we expect significant revenues to start flowing in Q2 this year in readiness for the main education season. We look forward to discussing ongoing relationship with Samsung and progress over the coming months. Finally, I would like to reference the significant amount of emergency funds that are being made available for education as a result of COVID. In the US, The $2.2 trillion CARES Act provided $30.7 billion for education. The $900 billion COVID Relief Act signed into law in December provided a further $82 billion. And the $1.9 trillion American Rescue Plan signed into law this month provided $168 billion. In total, we estimate that there is approximately $3,000 every school child in public education in the US and circa $70,000 available per classroom. All of the solutions that BoxLight sells in the US are eligible for these funds and we are actively working with school districts to ensure that the funds are correctly spent. It should also be noted that BoxLight is the only top five IFPD supplier in the US which is not directly owned by a foreign entity. The other four providers are either Chinese or Taiwanese owned and we are starting to educate our partners and end users on the importance of security and data sovereignty. In summary, Q4 was a very strong quarter in terms of order intake and revenue and we continue to develop our key partnerships and alliances across the globe. I would now like to hand back to Michael.