Boxlight Corporation

Thank you and welcome to the Box Light Third Quarter 2021 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 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.boxflight.com. And with that, I'll hand the call over to BoxFlight's chairman and chief executive officer, Michael Pope.

Hi, everyone, and thank you for joining. The third quarter was yet another tremendous result. We again exceeded our guidance and delivered our strongest quarter to date with $61 million in revenue, $7 million in adjusted EBITDA, and for the first time as a company, positive net income and positive earnings per share. For five consecutive quarters, we have now reported both above-market revenue growth and positive adjusted EBITDA. For the trailing 12 months into Q3, we reported $214 million in orders, $173 million in revenue, and $15 million in adjusted EBITDA. We concluded the third quarter with an improved balance sheet, including $32 million in working capital and $55 million in net assets. We continue to see double digit growth globally and expect to deliver $40 million in revenue for the fourth quarter, representing 26% growth over the same quarter last year. For the full year 2022, we are forecasting $230 million in revenue representing approximately 27% growth over our 2021 guidance and greater than 10% adjusted EBITDA. but will be effective as of October 31st. Headquartered in Petaluma, California, Front Row provides solutions for classroom audio, campus communication, emergency communication, and audio-visual control. The company's product suite includes the Juno all-in-one line array tower with teacher and student microphones, installed distributed audio solutions, and IT-based campus communication including bells, paging, and intercom. The company was founded in 1963 and has sold solutions into over 25 countries, including 9,600 school districts in the United States. Jens Holstebro, CEO at Front Row, will accept the position of Senior Vice President of Audio Solutions at BoxLight and manage BoxLight's audio strategy going forward. Today, the company has 44 employees, of which 17 are sales representatives located in the US, Canada, the UK, and Australia. On an unaudited basis, for the traveling 12 months ended October 31st, Front Row generated approximately $25 million in sales, greater than 50% gross profit, and $6 million in EBITDA. We identified classroom and campus audio as our top growth opportunity outside of displays late last year, and we actively pursued Front Row with its standout solutions. We look forward to fully integrating the Front Row products into our BoxLight ecosystem. We also expect to substantially increase demand for the front row solutions as we leverage our global sales team and reseller channel. During the third quarter, we published another nine case studies, bringing the total to 39 customer success stories since the beginning of the year. You can read the case studies by visiting goldboxlight.com and clevertouch.com or by following BoxLight, CleverTouch, and Mimeo on the various social media platforms. The case studies cover implementation of our broad solutions, including interactive displays, digital signage solutions, STEM education, and professional development services. The examples also cover both the education and enterprise markets and are evidence of our commitment to be a trusted partner to our customers, providing and supporting our solutions in varying environments. In July, we released our updated STEM guide, reflecting our robust portfolio of STEM solutions, including standards-aligned lessons and activities, 3D printers, robotics and coding, and sensor technologies. Our STEM offering provides turnkey solutions with teacher training by our STEM subject matter experts. In August, US Education, our professional development division, earned recognition as a Google for Education service partner with the Google Cloud Partner Advantage program. This allows us to offer educators customized professional development and support specific to Google Workspace for Education and Google Cloud Functions. By earning this upgrade, we are recognized as a Google Cloud Partner with an Education Partner Enterprise designation, further broadening our service market to provide professional development and training to organizations outside the US. We continue to receive industry recognition for our innovation and cutting edge solutions. In August, we were winners of Tech and Learning's 2021 Best Tools for Back to School, for both primary and secondary levels for four of our solutions. Our MinioConnect Blended Learning Platform, ProColor Interactive Displays, Robo3D Printer and MySTEMKits Platform Bundle, and Professional Development by EOS Education. Earlier this month, we were recognized for two Tech and Learning Awards at this year's InfoComm, the largest ProAV event in North America. Our CleverTouch Impact Plus interactive touchscreen and CleverTouch Live content management platform were both recognized as Best in Show winners. We also recently expanded our partnership with Samsung to offer our Samsung BoxLite Chromebook Class Collection, a state-of-the-art one-to-one technology solution. The collection combines the best-in-class technology Samsung Chromebook with our Mimeo View document camera, Mimeo Connect blended learning platform, and BoxLight professional development content. Lastly, I'd like to take a moment to recognize our amazing leadership team and talented and diligent employees. Our success as a company is a direct result of our ability to hire and retain tremendous talent. As a growing company, we are conscientious about nurturing a positive, collaborative, and supportive culture where every member of our team is enabled and motivated to contribute to our collective mission. Our recent company-wide survey confirmed that 96% of our employees enjoy working with each other and feel that they receive the support they need from their managers. We will continue to foster a positive and winning culture, which will propel us to our goal to leave industry. With that, I will now turn the call over to our president, Mark Starkey, to provide additional insights.

Thank you, Michael. Q3 was another quarter of rapid growth for BoxLight, and I want to take this opportunity to thank our employees, our customers, and our investors, as this performance would not have been possible without their continued support. As Michael stated earlier, we booked $51 million of orders in Q3. That represents 756% growth in order intake year on year. If we include Sahara in the pro forma numbers for last year, then the organic growth rate in orders for Q3 is impressive at 55%. The growth in order intake reflects the huge market opportunity that we see in both education and corporate sectors. The value of orders booked for the first nine months of this year is $179 million. compared with $20 million booked in the first nine months of the previous year. That represents nearly a ninefold year-on-year increase in orders booked. We are now forecasting order intake of excess of $210 million for this financial year, and we will enter the FY22 with a healthy backlog. Our largest customers in Q3, in terms of order intake, with ASI in Australia with $6.7 million of orders received. Our growth in Australia has been very significant with our partner ASI being recognized as the fastest growing private company and taking us to the number one market share position over the past 18 months. In the US, our partner network continues to grow with over 350 active partners We received $3.1 million of orders from our U.S. distribution partner, D&H, and a further $2.1 million of orders from Trox to highlight some of the U.S. orders that we received during Q3. In Spain, we received $2.9 million of orders from our partner, Charmé International. And in Northern Ireland, we received $1.7 million of orders from our partner, Niobac. In Denmark, we received $1.6 million of orders from UnitDK, And in Finland, we received $1.3 million of orders from EET Europarts. In the UK, where we have over 600 active partners, we received $1.2 million of orders from IDNS and just over $1 million of orders from Roche Audiovisual to highlight a few of our key customers. The US and the UK both accounted for 27% of our orders booked during Q3, with EMEA excluding the UK accounting for 32%, and the rest of the world, 14%. In Q3, 81% of our revenues came from sales of interactive flat panels, both ProColor and Clevertouch. Our overall global market share of IFBDs, excluding China, increased from 6.1% to 7.1%, according to the latest report from FutureSource. We remain in the top two IFPD providers in the UK with 15.2% market share and are confident that we will become the market leader very soon. Our biggest opportunity for significant growth remains in the US, where we are ranked number five with 8.6% market share. It should be noted that our growth in the US has seen our market share nearly double from 4.6% to 8.6% over the past 12 months. In terms of market size, the US market for IFBDs is estimated to be worth $1.8 billion in 2021, growing to $2.2 billion in 2022, according to FutureSource. The market in EMEA is slightly smaller at $1.5 billion, growing to $1.7 billion by 2022. Overall, this gives us an addressable IFBD market of about $3.3 billion in 2021, growing to about $3.9 billion in 2022. Given that our overall market share has grown from about 6% to approximately 7% this year, it gives us plenty of room for substantial organic growth over the next few years. In terms of end users, we had another quarter of great wins across the globe. In Germany, we had a fantastic win in the pension authorities. The win includes a commitment for a minimum of 500 units of UX Pro IPDs over the next four years, a minimum of 100 units of the CM series, and a minimum of 25 of our newly released 98-inch UX Pro solutions. The deal is worth at least $1.4 million and will help propel our growth into corporate solutions with the German public sector. In Holland, we won a contract to supply our UX Pro solution to GDD, a Dutch national health provider, putting our Clevertouch solution into their offices, vaccination centres and COVID test locations. In the UK, we had some fantastic wins with schools such as Camden in London and Berry Grammar School. In both instances, it was our software, including Lynx Whiteboard and Clevertouch Live, that enabled us to differentiate from the competition. In Northern Ireland, our partner, Niavac, won a large deal with Belfast Metropolitan College for nearly 400 screens. In the US, we won a fantastic deal with Everett School District near Seattle for 800 classrooms with our Mimeo Pro colour solution. The school district really liked our unplugged casting solution and this differentiated us from the competition. We also had another great win at Harford County in Murrayland. of 500 classrooms, replacing their old Promethean screens. The teachers evaluated our solution, and again, really liked the ease of use and the unplugged solution. Finally, with our Cal Ripken partnership, we have already installed our STEM 3D printers in over 138 centers around the country, and we are looking to expand the offering to build super STEM centers that are comprised of both STEM products IFBDs, and audio equipment from BoxLight. During Q3, we sold more than 3,300 Mimeo Connect software licenses for Samsung products. These are three-year term-based licenses and will create future repeat software business on an ongoing basis when they're renewed. In total, we had $1.4 million of software revenue in Q3 and have invoiced over $3.4 million of software during the first nine months. We expect software revenues greater than $4.8 million for the full year, and we are continuing to explore the monetization of our software suite. Our expectation is that Mimeo Connect, Lynx Whiteboard, and our app store will be the foundation of our sales-based solutions and create a high-margin annuity stream moving forwards. The addition of Front Row to our BoxLite family means that we extend our reach into the classroom. We now have a comprehensive solution set that includes IFPDs, both Mimeo and Clevertouch, STEM solutions, including Robo3D printers, LabDisc, portable science devices, Mimeo MiBot robotics, and coding solutions, all utilizing mySTEM kits platform. We also have a multitude of software, such as Mimeo Connect, Mimeo Studio, Octopus, and Lynx Whiteboard, and professional development solutions from EOS. The addition of market leading audio solutions from front row means that we are very well positioned to lead the growth in EdTech and become the natural choice for many schools, districts and colleges across the globe. As Michael mentioned earlier, during the quarter we expanded our Samsung partnership to introduce a student Chromebook bundle as part of our classroom solutions, including our Mimeo Connect software and our Mimeo View camera. This deepens our relationship with Samsung and widens our solution sets to include devices in the classroom. In summary, Q3 was an outstanding quarter in terms of order intake with record revenues and profitability. Our solutions are gaining traction in the market and we continue to build out our sales channel. As Michael stated earlier, our current revenue guidance for Q4 is $40 million, giving a full year revenue guidance of at least $181 million. We expect our order intake number to be north of $210 million for the full year, providing a substantial increase to our sales backlog. Our adjusted EBITDA percentage has continued to improve throughout the year, from 4.8% in Q1 to 11.5% in Q2, and then 11.9% in Q3, despite strong margin pressures due to increased freight and shipping costs. The improvement in profitability and adjusted EBITDA percentage is due to the ability of the business to leverage higher revenues and gross margins without substantially increasing the cost base. With that, I will now turn the call over to our CFO, Patrick Foley.