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spk07: Thank you and welcome to the BoxLight first quarter 2021 earnings conference call. By now, everyone should have access to the press release issues 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 security 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 K-10 and 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 reconciliation 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 at investors.boxlight.com. And with that, I will hand the call over to BoxLight Chairman and Chief Executive Officer, Michael Pope.
spk02: Good afternoon, everyone, and thank you for joining our first quarter 2021 earnings call. We completed another record quarter with $48 million in customer orders, $33 million in revenues, 28% gross profit margin as adjusted for acquisition-related purchase accounting, and $1.6 million in adjusted EBITDA, again outperforming our guidance for the quarter. We also reported, as of March 31st, $21 million in back orders, a strong balance sheet with $10 million in cash, $23 million in inventory, $22 million in working capital, and $47 million in stockholders' equity. Our triple-digit revenue increase over the same quarter last year is a testament to our winning expansion strategy through both organic growth and strategic acquisitions. We continue to benefit from unprecedented market expansion, particularly in the education sector as schools return to in-class learning and are utilizing increased technology budgets supported by substantial government funding programs. Given our current order volume and growing sales pipeline, we are optimistic on the second quarter and expect to report revenue of $39 million and adjusted EBITDA of more than $1 million, resulting in an expected first half of 2021 with $72 million in revenue and greater than $2.6 million in adjusted EBITDA. In addition to our remarks today, I invite you to reference our shareholder letter published on April 27, which provides a more detailed accounting of our progress to date, as well as insights on our growth strategy. While receiving record order volume, we have experienced some supply chain challenges, including interruptions to inventory production schedules as a result of component shortages, along with delays in the shipping and receiving of goods. We've also been managing cost increases for both hardware and shipping, which has resulted in reduced gross profit margins. These are global challenges and are not unique to us. However, we believe we are managing better than most by extending our production planning and, where we can, increasing prices to our customers. As of today, we have scheduled production through the end of 2021 with anticipated lead times of four to six months on certain hardware solutions. On March 23rd, we acquired Interactive Concepts, our distributor in Belgium and Luxembourg, extending our footprint in Europe. This transaction was part of a broader strategy to both improve our profit margins and maintain stronger relationships with our reseller channel and end users in that territory. Year-to-date, we've published 18 customer case studies highlighting successful technology implementations, including in Canyon City Schools in Colorado, Shelby County Public Schools, and Trinity Parish Schools in Kentucky, the Ridgeway School and the British Academy in the UK, and San Agustin de Bilbao Center for Higher Studies in Spain, among others. These case studies highlight the positive impact that our technology solutions have on learners, including students with special needs, the strong future of STEM solution integration in classrooms, and the benefits of display technology for higher education and corporate environments. we will continue to produce a steady flow of educator and corporate success stories featuring our breadth of solutions. In early March, we announced both our BoxSite Virtual Classroom in Atlanta and CleverTouch Gallery in central London. Our BoxSite Virtual Classroom is a fully staffed classroom space used to facilitate customizable live virtual education experiences utilizing our full solution suite. The virtual space is also used to host weekly education-focused webinars to help educators understand how our solutions can best be used to optimize learning. Our CleverTouch Gallery in London showcases our state-of-the-art collaboration touch screens, commercial displays, digital signage, and cutting-edge LED video wall. The gallery features a boardroom, unified communications huddle space, informal meeting areas, and hot-desking space for partners and colleagues. Also in March, we launched CleverTouch Academy, an expansive hub of resources, tutorials, lesson plans, virtual self-paced training, and detailed downloads designed for educators, trainers, trade partners, and engineers. Earlier this week, we announced our certification as a Google service partner in education with specialization in professional development for the U.S., Europe, Latin America, Australia, and New Zealand. During Q1, we had some significant updates to our software platforms, including the latest releases for Mimeo Connect and Lynx Whiteboard, which is now available in all major app stores, including Google Play, Samsung, Amazon, and Apple. Mimeo Connect has been enhanced with video and audio communication and additional classroom management tools. Our new Clever Touch Live platform is an ecosystem allowing users to deliver and manage digital signage, messaging, alerts, and customizable user interfaces across any network. Our Mimeo touchscreens also feature Mimeo Message, our digital signage platform, and Mimeo Market, our education app store. In addition to the updates to our platforms, we have also developed our next generation of interactive displays with several significant technology updates, making them the most advanced on the market with anticipation to begin shipping later this year. As we continue to expand resources for educators, companies, and partners, we are receiving substantial recognition from the ed tech and AB industries for our innovation. During this year, both our Mimeo Connect blended learning platform and My STEM Kits content earned awards from Tech and Learning Magazine for best remote and blended learning tools in the primary and secondary school categories. Additionally, our Robo 3D printers and My STEM Kits curriculum and our Mimeo Clarity classroom audio system. were named as EdTech finalists by EdTech Digest. CleverTouch was shortlisted at the Innovation Awards for Best Place to Work, Best Business Growth, and Best Communication and Collaboration Product for the UX Pro, with winners to be announced next month. As school systems identify needs for their teachers and students, many school systems are looking to government relief funding to purchase resources, materials, and training. In the U.S., To assist school districts with accessing federal funding such as that provided by the CARES Act, the Coronavirus Response and Relief Supplemental Appropriations Act, and the American Rescue Plan Act, we have developed and promoted support content and services. This includes our newly released relief funding guide and expertise of our internal funding team to help decision makers navigate the process of acquiring this critical funding. I am extremely proud of our progress through Q1 of this year, led by our tremendous leadership team and talented, hardworking employees. We are committed to our loyal partners and supportive shareholders, and we will continue to drive results and realize our mission to be a global leader in providing interactive technologies. 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.
spk06: Thank you, Michael. Q1 was certainly a record quarter for us, and I would also like to take this opportunity to thank all of our staff and our customers who have helped contribute to our success during the quarter. As Michael stated earlier, we booked over $47 million of orders from our partners. That represents a 528% growth in order intake year on year and is a record for BoxLight. Some of our key orders in the U.S. included $8.7 million from Tierney, $4.2 million from Central Technologies, $2.4 million from our distribution partner, D&H, $2.2 million from Trox, $2.2 million of orders from Digital Age Technologies, and $2 million from Data Projections. Whilst many of our largest orders were from U.S. partners, it is worth noting that we took over $21 million of orders from partners outside of the US, predominantly in EMEA. This highlights the quality and diversity of our customer base, which will be crucial as we develop and expand our business over the next few years. On the 26th of April, two of our largest partners, Tierney and Trox, merged to become one organization. This is a very significant opportunity for Boxlight because Tierney currently has exclusive rights to sell Clevertouch in 49 of the 50 states in the US. We are discussing the extension of our CleverTouch exclusivity contract to include trucks across 49 states and Canada. This means that once an agreement is reached, the number of salespeople who are actively selling CleverTouch in the US will increase substantially from about 40 heads to over 200 heads. We expect the agreement to be finalized in the next few weeks. This automatically gives Clevertouch true sales presence across the US and Canada. In terms of end users, we had another quarter of fantastic wins across the globe. One notable win was the Ministry of Defense in the UK. The MOD purchased more than $1.4 million of Clevertouch screens to use throughout their bases in the UK. They selected our screens for two main reasons. Firstly, the ability to totally lock down our screens and use them in a very secure environment. And secondly, because of the flexibility of the Link software, allowing the MOD to get the maximum benefit from the clever touchscreens. The Americas region for BoxLight had several key wins in Q1 of 2021. Brighton School District in Michigan purchased more than $1.1 million in BoxLight product, including 330 86-inch panels and our Mimeo Clarity audio system for each classroom. Our key reseller in Tennessee, Central Technologies, continues to do well throughout the state, purchasing more than $2.6 million in box-like products in Q1, including a major win in Warren County. Our strategic partnership with Samsung has continued to progress this year. We recently received our first substantial order from our Minimeo Connect software from Samsung US for approximately $1 million. Furthermore, Samsung has agreed that every interactive panel that they sell into the US education customers will automatically include a Mimeo Connect license. We are also in discussions with Samsung UK and other parts of EMEA about similar opportunities for a Mimeo Connect solution and hope to announce further wins shortly. In addition to the software sales, we are also committed to selling high volumes of Samsung hardware under our partnership agreement, including non-interactive displays and look forward to providing additional updates later this year. In summary, Q1 was a very strong quarter in terms of order intake and revenue, and our solutions are getting a lot of traction in the market. We continue to develop our key partnerships and alliances across the globe, and I look forward to another record quarter in Q2. With that, I will now turn the call over to our CFO, Patrick Foley.
spk05: Thanks, Mark, and good afternoon, everyone. To further expand on what you've already heard from Michael and Mark, I would like to add a few figures to provide some context to BoxLight's international operations. So revenue by country and region. Total revenue in Q1 was $33.4 million, of which EMEA was 54%, or $18.1 million, of which the UK represented 56%. The US was 42%, or $13.9 million, The rest of the world, 4%, $1.4 million, which was mainly Australia and South Africa. In terms of customers, the top 10 customers represents approximately 47% of total sales in Q1, with the single largest customer at 8%. And these are based across a number of markets, namely US, UK, Denmark, and France. Nearly two-thirds of total sales are covered by the top 20 customers, approximately 64%. This is pretty similar to our Q4 2020. For our sales, product mix, and gross margin, in Q1, displays remain the largest proportion of total revenues at 78%. These are largely sales of interactive flat panel displays with related accessories generating a further 9% and the balance coming from software, services, and STEM solutions. Adjusted gross margin for the quarter was 25.6%. The ISPD margin was approximately 26%, which would have been slightly higher. However, as reported by Michael earlier, increased global shipping costs, where we are seeing a 4x normal rate, have reduced margin by up to four percentage points. We anticipate that higher costs will remain for the next two quarters. Screen sizes and their splits. In Q1 2021, within the education sector, 77% of all interactive displays were 75-inch and 86-inch panels, which follows the trend we are seeing with larger screen formats. I will now review our first quarter results. Our financial results for the three months ended March 31, 2021 were as follows. Revenues for the three months ended March 31, 2021 were $33.4 million as compared to $5.7 million for the three months ended March 31, 2020 resulting in a 484% increase due primarily to the acquisition of Sahara in September 2020. Gross profit for the three months ended March 31, 2021 was $8.6 million as compared to $1.6 million for the three months ended March 31, 2020. The gross profit margin for the three months ended March 31, 2021 was 25.6%, and the adjusted net effect of acquisition-related purchase accounting, the margin was 28%, as compared to 27.9% gross margin as adjusted and reported for the three months ended March 31, 2020. Gross margins have been adversely impacted by up to four percentage points due to increased freight and customs costs caused by supply chain challenges associated with the effects of the COVID-19 pandemic. Total operating expenses for the three months ended March 31, 2021 were $10.6 million as compared to $4.3 million for the three months ended March 31, 2020. The increase primarily resulted from additional overhead costs associated with the acquired Sahara operations in September 2020. Other income expense for the three months ended March 31, 2021 was net expense of $3.1 million. as compared to net other income of $0.7 million for the three months ended March 31, 2020. The increase in other expenses due to $0.6 million of increased interest expense associated with increased borrowings, $1.9 million of losses recognized on the settlement of certain debt obligations that were exchanged for common shares, fewer gains were recognized on the settlement of accounts payable, which were $1.1 million lower year on year, and $0.3 million of additional losses that were recognized in 2021 upon the remeasurement of certain derivative liabilities associated with common stock warrants. The company reported a net loss of $5.2 million for the three months ended March 31, 2021, as compared to net loss of $2.0 million for the three months ended March 31, 2020. The net loss attributable to common shareholders was $5.5 million and $2.0 million for the three months ended March 31, 2021, and 2020, respectively, after deducting six dividends to the Series B preferred shareholders. Total comprehensive loss was $5.4 million and $2.1 million for the three months ended March 31, 2021 and 2020, reflecting the cumulative effect of foreign currency translation adjustments on consolidation, with the net effect in the quarter of $0.3 million loss and $0.1 million loss for the three months ended March 31, 2021 and 2020, respectively. The EPS loss for the three months ended March 31, 2021 was $0.09 loss per basic and diluted share compared to $0.16 loss per basic and diluted share for the three months ended March 31, 2020. The EBITDA loss for the three months ended March 31, 2021 was $2.4 million as compared to $1.3 million EBITDA loss for the three months ended March 31, 2020. Adjusted EBITDA for the three months ended March 31, 2021 was $1.6 million as compared to a loss of $0.7 million for the three months ended March 31, 2020. Adjustments to EBITDA include stock-based compensation expense, gains and losses recognized upon the settlement of certain debt instruments, gains and losses from the re-measurement of derivative liabilities, and the effects of purchase accounting adjustments in connection with acquisitions. At March 31, 2021, BoxLights had $10 million in cash and cash equivalents, $21.8 million in working capital, $139.7 million in total assets, $20.6 million of debt, $47.4 million in stockholders' equity, 56.8 million common shares issued and outstanding, and 3.1 million preferred shares issued an outstanding. And with that, we'll open up the call for questions.
spk07: At this time, if you would like to ask a question, please press the star and 1 on your touchtone phone. You may remove yourself from the queue at any time by pressing the pound key. Once again, that is star and 1 to ask a question. We will pause for a moment to allow questions to queue. And it looks like we have a question from Brian Kingslinger. Your line is open. Please go ahead.
spk04: Hi everyone. Thanks for taking my questions. This is Jacob on for Brian. Clearly your North American operations are benefiting from the federal funds. Can you talk about your international positioning and what are the growth rates like and how much faster do you think you can grow?
spk02: Yeah, so thanks for the question. This is Michael. I'll say a couple things, and then Pat or Mark, feel free to jump in. So when we look at the globe, the U.S. is absolutely our number one growth market. We're seeing more spending happen in the U.S. than we are in other countries, and so we have a tremendous focus on the U.S., but there are other countries around the world, including throughout Europe, that are also seeing high growth. Germany would be one that we talk a lot about. Other areas may be a little bit more static, but In general, when you look at the globe as a whole, minus China, which is the way that we look at the opportunity, and we're seeing double-digit growth, and that's true in the U.S., and that's true in other countries and aggregate around the world. And so there's absolutely opportunity all over. Now, as far as federal funding, there's substantially more federal funding in the U.S. that's been applied, but there are other programs internationally as well where we're seeing federal funds as well available for school systems in other countries. But, again, I would say absolutely the U.S. is number one market. Beyond that, it would be Germany and certain other territories throughout Europe and then other territories around the world.
spk06: Yeah. I mean, just to put a bit more color on that, in Q1, we had, in Germany specifically, we had 73% year-on-year growth in revenue. Okay. So significant growth rates.
spk04: Okay. Given the timing of some of the federal funding packages in the U.S. and talked about maybe in some other countries around the world, one being recent, do you expect the seasonality to be more pronounced this year, meaning in the second half of the year might account for a significantly higher percentage of annual revenues?
spk02: That's a good question. I think we're still figuring that out. If the federal funding that's being made available, if that's spent more quickly, then I think absolutely that will be the case. But I think it's yet to be seen how quickly some of these funds will be spent. I will say that we are seeing spending now from the CARES Act money. And you'll remember the CARES Act went in play in March of last year. And we're receiving orders now where schools a year later are spending that CARES Act money. And that CARES Act money, that was part of a a $2 trillion CARES Act with about $31 billion that was allocated to education. You'll remember that in December, there was another COVID Relief Act that hit. That was about $82 billion for education. And then in March, the most recent stimulus package, that was $170 billion for education. So we're definitely going to see a lot more money flowing in. I would anticipate the vast majority of that is going to lag into next year. but we do expect to have, with seasonality, a stronger second half of the year than first half of the year, if that's for certain.
spk04: Okay, and one more, and I'll hop back in the queue if I have any more. Can you talk about the supply chain? Is there any quantifiable impact? I think you mentioned about 4% on gross margin, but any impact that you're seeing here? on revenue and orders and then continuing gross margin and also on building inventory. Is there any more color you could give on that and how long you might expect this to last?
spk02: Yeah, so let me tackle the latter part of the question and I'll cover the rest. So as far as timing, it's uncertain. It's a global problem, as we mentioned in our remarks. It's affecting You know, those in our industry as well as many outside of our industry, anybody that utilizes chips and components for technology and even metals and plastics, we're seeing potential shortages of. So I will say that we're managing it the best we can. We're ordering out way in advance. We mentioned the remarks that we've ordered out through the end of the year, so that's well beyond where we normally would order out. We're seeing lead times of four to six months, and so we're planning accordingly. It has not affected us in a major way to this point in time in deliveries. There have been some slippages of deliveries, but generally we're meeting our delivery timeframes. We believe that's still going to happen in Q2, that we'll meet our timeframes. There is a little more uncertainty around Q3, Q4, but like I said, we're doing everything we can to manage that. As far as impact on orders, we're not seeing impact on orders. We're seeing a tremendous amount of orders, and I think if we're better off than the competition, we'll be put in an advantageous position because I think we may be receiving some orders that maybe could have gone somewhere else. And then as far as financial impact, you heard the 4%. That's related to shipping costs. We are seeing also additional cost of goods in the cost of our technologies, and that's in the way of increases in prices on components and increases in the bill materials from our manufacturers. But we're trying to offset that the best we can. In many cases, we've been able to increase prices to our customers, and that helps offset that and negotiate the best we can with our manufacturers. And you can see in Q1, our gross profit, when you adjust for those purchase account adjustments, we were 28 points, which we were happy with, you know, that 28% gross profit margin. That's compared to, you'll remember in Q4, We had about a 26.5% comparable gross profit margin. So we're trending in the right direction. We think as some of these concerns around increase in costs around freight and materials, as those start to normalize, we ought to gravitate more towards around that 30 points gross profit margin.
spk05: Michael, I would just add to that also the point in terms of supply chain and in terms of what we're doing in terms of pre-planning. So in terms of our working capital, when you look on the balance sheet, you'll see the shift actually moving into our increased inventory. So actually being prepared for that. So we're also, you know, as Michael mentioned, we have kind of like a lead time around four to six months. So we are actually pre-planning against that and actually stocking accordingly.
spk04: Great. Thanks so much, guys.
spk02: Yeah, thank you for the questions.
spk07: Once again, that is star and 1 to ask a question. We'll take our next question from . Your line is open. Please go ahead.
spk03: Okay, great. Hey, Michael. Hey, team. Solid results, strong guidance. A couple questions. I'll start with . So in your recent shareholder letter, you indicated an expectation for at least 40 million of customer orders and you raise your revenue to over, you know, at least 31 million of revenue. But clearly based on today's results, you comfortably exceeded both of those targets, you know, over 47 million of orders and over 33 million of revenue. Can you just maybe speak to some of the drivers that led to that, you know, positive Delta or upside surprise?
spk02: Yeah. Yeah. So a couple of things, you know, one, we are seeing, Increased demand, even beyond our internal targets in the industry, and that's a function of additional focus on technology buying. Some of that is because a lot of classrooms are going back to traditional or hybrid learning. That puts more focus on it. There's also a lot more political focus on technology in the classroom, but then also there's an immense need for technology. educators and students to have technology to be able to return to learn and bridge the learning gap and be effective. So that's part of it, just a general industry. On top of that, you heard us talk about federal funding. That also is driving additional demand, knowing that these federal funds are coming and those funds are expected to be utilized towards these technologies that we're providing. And then I would add on top of that, we're a healthier company now than we've been in the past. We had some challenges. If you go back a few quarters, you know, Jack, because you followed us for quite some time. And so just by nature of being a healthier company, I believe there's a lot more confidence from end users. There's a lot more confidence from our partners. We sell to reseller partners, and so a lot of those partners now believe in us, and they're standardizing more in our solutions. And then also we have a steady stream of supply of solutions, so that provides – You know, again, um, you know, more confidence from the partners and then it comes down to just, you know, the solutions themselves. We have the best solutions in industry. We're telling that story. We're out there. We're sharing that we're investing more in our sales team and all of that is generating results. I would say in general, the uptick in additional orders, the uptick in sales as a result of those mix, uh, that mix of, of, of items. Now, um, you know, from when we provided guidance to the sales figures coming in higher, now that came down to us reconciling, you know, towards the end of the quarter. and figuring out what those numbers would be. And we were trying to be conservative when we put the numbers out there. And I was pleasantly surprised that we came in well above our initial numbers we were looking at. So that was just a nice surprise. But we knew that we were in a good place with the guidance of the $31 million in revenue and greater than $40 million in orders.
spk06: And, Michael, I'll just put a bit more color on that. You know, we're winning. We are winning. You know, wherever we're playing, we're winning. You know, we're really investing heavily in the sales team. they're being heavily trained. We know we've got the best products. Okay. We're winning. And, uh, you know, we got the sale in our wins or the wind in our sales. And, uh, you know, it's, uh, we're getting a lot of good results. So, you know, we're winning a lot of good orders. Yeah.
spk03: Yeah. Fantastic. I appreciate, uh, the, uh, the deep color there that that's helpful. Um, and then just if I, if I turn to, uh, Speaking of federal funding opportunity, and there's only a few questions on this already, but just how many of your districts are actively in discussions or your channel partners and your district partners, how many of them are you actually working with currently or have ongoing communications? There's an actual real immediate or pending expected opportunity there to access this funding. in all of your districts. You have so many school districts and classrooms that you're already penetrated and all across the country. Is this happening universally across all your different territories and districts, or is it kind of off and on here or spotty, I should say, and then ramping up to it?
spk06: Michael, do you want to take that? I mean, simply, it's everywhere, right? It's consistent. It's everywhere.
spk02: That's right. Yeah, obviously in the U.S., every district in the U.S. is getting allocation of funds, so they're talking about it. I would say the majority of those districts have minimal experience in knowing how to access those funds, so they're scrambling to do that. And we provide a lot of resources around that. We have a team that helps those districts access funds and understand how to utilize those funds. We put out a new guide just a couple weeks ago, and that's a detailed guide of school districts. They can read that guide and understand more about utilization of the funds and accessing the funds. But we're happy also to provide additional resources beyond that. Outside of the U.S. and other countries where there's funds allocated, same thing. You know, everybody knows that the funds are out there and looking to access those funds.
spk06: Just a bit more info. Sorry, Jack. So the other key thing to look at in the U.S. is the penetration rate. So the penetration rate of IPDs in the U.S. is actually significantly lower than EMEA, okay? That means the opportunity for us is significantly greater than So that's why we're expecting, you know, such significant growth rates from the U.S. side of our business.
spk03: Guy, I'm glad you brought that up because that's what I was going to follow up on is just in terms of the overall opportunity. How many – I imagine that, you know, if there's a lot of school districts, maybe they haven't been renovated or, you know, have newer technology available. implemented yet into the classrooms. I'm expecting that this could be an opportunity for those districts to actually, you know, get some federal funding to actually make that happen. Does this open the door then to a lot of new customers coming to you now? A lot of other districts that didn't already have any interactive technologies already built into their classrooms, that you weren't already, you know, helping or servicing in any kind of way, but now because of federal funding they're coming to you and knocking on your door?
spk02: Yeah, so there's absolutely some of that. And, Jack, I would add, too, there are a lot of districts that were planning on technology refreshes or new technologies in their district, but they didn't have the funds allocated. And so now that they have this new funding coming, they're accelerating some of those decisions. But I think, you know, to Mark's point, you know, a couple thoughts I think are important. So one is definitely districts that don't have the technologies we sell, it's an opportunity for us to sell in. But also we There's large districts that are doing refreshes of technologies they put in play. It could have been five or even ten years ago. And the solutions we're selling with interactive flat panels, various hardware solutions, most of those have about a five to seven-year life cycle. And so when you install these solutions five to seven years later, we're doing a major refresh. And if you look at some of the largest districts where we've been selling, like San Diego, we've talked about, or Montgomery County, or Clayton County in Georgia, or Beaufort County, South Carolina, those were actually refreshes of our competitors' technologies, right, of interactive whiteboards or other interactive flat panels in those districts. And they're replacing that old technology with our newer interactive flat panels, which are 4K, high-definition, with app stores and other other technologies that we're including?
spk06: I mean, just, I mean, on average, every single classroom in the U.S. effectively has $75,000 to spend. And it's like, what are they going to spend that on? And technology is pretty much high up there. And we know we've got a lot of potential solutions for those classrooms. So we think we're well positioned.
spk03: Got it. That's helpful, guys. And then just another question on the second quarter guidance. Very strong guidance is ahead of my expectations. For revenue of $39 million and at least $1 million of adjusted EBITDA, just wondering about that adjusted EBITDA number of at least $1 million. How conservative or, you know, how much wiggle room is built into that, just given your comments around the supply shortage of components? And is that like risk adjusted for that? And maybe some gross margin hiccups? Just, you know, how much cushion are you baking into there? Because given, you know, you just did over $1.6 million of EBITDA, basically, for the first quarter on less revenue. So just trying to figure out if that's a conservative target or not.
spk02: Yeah, two reasons for that, Jack. So one is you're absolutely right. It's risk-adjusted for potentially some higher costs around our inventories we bring it in as well as delivery of those goods. But then also, you know, we've been focused on broadening our sales team and increasing some of our marketing spend, and we've been absolutely focused on taking market share, and that gives us a little buffer as well for some of the expansion, a little bit of expansion in our op-ex as well. So it's a combination of those two. We say at least, right, you know, so there's definitely some room to be much higher than that. And we expect we will be higher than that. But that one million was a conservative estimate to provide.
spk03: Okay. And then maybe just lastly, you know, in terms of your geographical focus, you've been gaining market shares. You know, last quarter you did mention that you took number one market share in Australia. Just maybe an update around, you know, are you making any noticeable or, you know, material headwinds? It's only been a couple months, maybe a month or two since we last spoke, but what's the next market share that you see yourself, you know, climbing the ladder up the quickest in terms of geographical region?
spk06: So, do you want me to say this, Michael, or do you want to take it?
spk02: Yeah, go ahead, Mark.
spk06: Yeah, so in terms of that data, in terms of that report, the next one comes out in about six weeks' time. So we'll have that shortly, and then we'll be able to share where we are in terms of our actual statistics and market share. But in terms of where I see the growth and where we're effectively going to take market, I think the U.S., I think Germany, I think the U.K. were already very strong. I think we could potentially go up to second position. I'm looking at the volumes that we're doing, the actual quantities that we take, whether we're actually selling in IPDs, and it's really quite staggering, the growth that we're doing in the volume. So I think really for us, the key targets are taking market share in the US, taking market share in Germany, and then other parts of Northern Europe. So that's probably the best guide we can give.
spk03: That's helpful. And actually, I do have one more question. I apologize. On the Samsung arrangement or partnership, you know, it seems like it's starting to finally kick in a little bit here. Wondering how your second quarter revenue guidance contemplates contribution from Samsung in any shape or form. Is it meaningful? And then also, do you still expect Samsung to really materially ramp into a real revenue contributor situation? you know, during the back half of this year.
spk06: Do you want to lead that, Michael, or do you want me to lead?
spk02: Yeah, well, I'll say just a couple things, and I'll have you fill in the gaps. So the answer is we have not baked in substantial sales at this point into our Q2 of Samsung because we believe the ramp is going to be in the latter part of the year, and we've only, of course, guided to a Q2. We do think it can start to be significant, and we said that in our remarks, you know, A nice movement in the right direction was the announcement we made in our remarks of a million dollars in licensing of selling our Mimio Connect and other solutions to Samsung and their agreement that every interactive flat panel sold in education, every Samsung interactive flat panel sold in education in the U.S. will be accompanied with our Mimio Connect software. So that's a movement in the right direction. Now, the recognition of that revenue, we still need to model that, but it's going to be over a period of time because those Mimeo Connect licenses are three-year licenses, and so we'll have to look at how that revenue is recognized. But that was a nice move to bring in that $1 million of orders of that software platform and our training and some other software and content that we're providing. But again, I think come next quarter, we should have a better grasp on where we are with Samsung and be able to provide more updates.
spk03: Fantastic. It sounds like there's a lot of, it's just, it's a conservative embedded contribution from Samsung and that guide, you know, a strong second quarter revenue guide. So that's, that's great to hear. It means there's probably room for upside down the road here as you progress. That's it for me guys. Thank you.
spk02: Yeah. Thank you, Jack.
spk07: Our next question comes from Chad Bergen. Your line is open. Please go ahead.
spk01: Hi, good afternoon, and congratulations on the really good quarter for VoxLight. Actually, just a quick comment, mainly because I work with federal grants. I just really, really appreciate the approach that you all are taking in terms of setting up kind of an education and assistance center for school districts to take advantage of the federal funding. I know in my line of work, the capacity to apply for that seems to be one of the biggest bottlenecks. And so my first question kind of relates to that. Given that I think you've deployed a really good strategy there, Are you seeing kind of an acceleration in kind of requests for help and demand and that type of thing? Because I think I recently heard that only maybe about three to five percent of that funding for school districts have already been spent. So it seems like there's just a huge opportunity there.
spk02: Yeah, Chad, that's a good question. So the answer is yes. We're seeing a significant ramp in questions and requests for assistance in accessing funding. Absolutely, the vast majority of the federal funding has not been spent or accessed. Even of the CARES Act, just a few weeks ago, I saw an update to a report that showed that maybe as much as maybe half had been spent, so there's still a substantial amount, or allocated, so there's still a substantial amount of even that first tranche of CARES Act money that is yet to be allocated. So the answer is yes, we're seeing that ramp, and we feel like us putting out the guide that we produced just a couple weeks ago and having internal resources, the timing is right. to where we're going to be a resource as more and more questions ramp.
spk01: Great, great. Well, and kind of tied to that maybe, one of the things that caught my ear was the increase that you're going to have in the sales team, I think increasing from around 40 to 200 with at least, I think, here in the States. And I was wondering if you could just provide maybe a little more color on that from the standpoint of, You know, are you at the point where you're kind of seeing so much demand that you're going to have – are you expecting kind of a huge material impact by expanding that sales team in that area? I was just wondering if you'd comment on that.
spk06: Yeah, let me take that first, Michael. So, yeah, just to make that clear. So currently we have – and these are external. These are sales people that are partners who can sell – our CleverTouch brand, okay? So at the moment, we only have about 40 people, salespeople at our partners who are able to sell CleverTouch because we have a very, very tight and controlled channel because we have exclusivity with Tierney. Because of the merger between Tierney and Trox, Trox have significantly more. They have about 160 salespeople. And we are in discussions about that exclusivity agreement and extending that to Trox now they've merged with Tierney. And therefore... the amount of external salespeople that are partners who are able to sell Clevertouch will increase significantly from about 40 to 200. So it's not us employing those people. Those are salespeople already employed by our partners. But the number of people who are now eligible and able to sell Clevertouch will increase by about 5x. So that's the first part of the question. The second part is, is there the demand there? Absolutely there is, 100%.
spk02: And, Chad, I'd add just to clarify that we sell through channel partners, value-added reseller partners, so we don't sell direct in most cases to then users. And we have over 1,000 of those partners across the globe. We have about 300 of those partners in the U.S., for example, and the majority of the remainder are throughout Europe. But those partners have, you know, in aggregate, thousands of reps. You know, you're hearing about truck security, but there's thousands of reps out there that support partners support BoxLight in selling our solutions and represent our brand. Internally, you know, we have dozens of salespeople to help support them, but we are selling through these reseller channel partners. Now, of those partners, you heard Pat mention in his remarks that the top 20 of those partners make up just over 60% of our total sales. So we do have, you know, some very significant partners like the Troxys and Tyrannies of the World, but we do have a substantial number of partners beyond that that do order from us and sell our solutions.
spk01: Great. Great. Thank you. And my final question focuses on, I was wondering if you might comment a little bit on what you're seeing in terms of forward-looking, in terms of the software solutions. You've commented a couple times, I think, on the Mimeo Connect licensing and those kinds of things. And my assumption, of course, is that software solutions are going to be probably a higher margin product than, let's say, hardware solutions. And, you know, what are you seeing, I think, in terms of the horizon for kind of the software aspect, you know, just beyond the hardware? Thank you.
spk02: Yeah. So, Chad, the way we think of our solutions is we look at different product categories. So it starts with displays. Displays represent, as we've mentioned, over 70% of our total sales. So that's our largest category. But those are, you know, largely interactive flat panel displays. Then on top of that, we sell accessories. Accessories include mounts and stands for displays, but also our audio solution and document cameras. We have tablets for the teacher. We have student response devices. Those all fit into accessories. And then we sell software. That's a category. We break out STEM, STEM standing for science, technology, engineering, and math. That includes our robotics solution, our 3D printing solution. We have a science device that we sell. And then lastly, we have a professional services division that provides training and professional development And we charge for that, and we provide that in some cases district-wide with large contracts. In other cases, we're providing online self-paced or variations in between. So you really have five product categories that we look at. Now, today, again, the largest category is interactive displays, but as we march into the future, part of our Our aim and vision for the company is to be able to increase those other categories much faster than the rate at which interactive displays are growing so that our product mix is less heavily weighted toward displays. So I'm giving you a roundabout answer that, yes, absolutely, we think that software will be a much higher percentage over total sales, as will be services and accessories and STEM solutions, and all of those are much higher margin. You know, software is – you asked about software margin – And that's almost entirely margin for us up in gross profit margin because most of that cost is actually captured down in our operating expenses. Now, internally, we evaluate a little differently. But if you're looking from an external standpoint, yes, that's going to be very, very high margin. But then also, if you look at accessories, most of those are 40 or 50 plus percent margin. Our professional services is 40 plus percent margin. Our STEM solutions largely are as much as 50 plus percent margin. And so, you know, again, as a company, we're focusing on improving the product mix. improving our gross profit margins, and software is absolutely a large part of that strategy.
spk01: Thank you, and I actually appreciate the more comprehensive answer to that. Well, that's all the questions I had, and again, congratulations on a great quarter. Thank you.
spk02: Thank you, Chad.
spk07: Once again, that is star and one to ask a question. It appears that we have no further questions at this time. I will now turn the program back over to Michael Polk.
spk02: Thank you, everyone, for your support and for joining us today on our first quarter 2021 conference call. We look forward to speaking to you again in August when we report our second quarter 2021 results.
spk07: This does conclude today's program. Thank you for your participation. You may disconnect at this time.
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