Boxlight Corporation

Thank you and welcome to the BoxLight fourth quarter and full year 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 the 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 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 analytic 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 at investors.boxlight.com. With that, I'll hand the call over to BoxLight's Chairman and Chief Executive Officer, Michael Pope.

Hello, everyone, and thank you for joining the call. Despite significant uncertainty in the world today, including growing concerns with the war in Ukraine, an ongoing battle with COVID-19, rising energy costs, rapid inflation, continued supply chain and logistic challenges, and overall volatility in global equity markets, we continue to see growing demand for our interactive solutions, and our outlook is overwhelmingly positive. We have reported double-digit or greater revenue growth for five consecutive quarters, a positive profitability trend, and significantly improved working capital. Just two years prior, we reported the full year 2019 results with $31 million in orders, $33 million in revenue, and an adjusted EBITDA loss of $6 million. We are a dramatically larger company today, benefiting from both market expansion and strategic acquisitions. For the full year 2021, on a pro forma combined basis with Front Row, we generated $250 million in orders, $215 million in revenue, and $21 million in adjusted EBITDA. We are gaining our key competitors with an aim to achieve the top industry position in each of our product categories. For the fourth quarter, excluding Front Row, we reported $44 million in revenue, exceeding our guidance of $40 million, and delivered organic growth of 38% over the fourth quarter of 2020. The financial results of Front Row were not included in our Q4 financial statements because we completed the acquisition on December 31st. However, due to significant one-time costs incurred to complete the acquisition and related financing, we experienced inflated operating expenses. Additionally, supply chain and logistics costs remained high during the quarter, impacting our gross profit margin. As a result of these additional expenses, we reported a fourth quarter adjusted EBITDA loss of $2 million. We concluded the fourth quarter with an improved balance sheet, including $18 million in cash, $53 million in working capital, and $52 million in net assets. For the current year, we are experiencing stronger than expected customer order intake, as well as growth in our sales pipeline, and have lifted our guidance for the full year to $250 million in revenue and $26 million in adjusted EBITDA. For Q1, we expect $44 million in revenue and $2 million in adjusted EBITDA. On December 31st, we formally closed the acquisition of Front Row, a leading provider of classroom audio and campus communication solutions for the education market. The purchase price was $23 million, net of $12 million in acquired working capital. Given the company generated greater than $7 million in EBITDA for 2021 prior to transaction adjustments, the resulting valuation was very attractive at less than four times EBITDA. We had identified classroom and campus audio solutions as our top growth opportunity and Front Row was a clear strategic fit. We are now integrating the company into our BoxSite ecosystem and benefiting from a broader solution suite along with our combined sales resources and global reseller channel. We are also in a position to expand our communication systems with fully integrated audio and video throughout an entire campus, a significant competitive advantage. For the full year 2022, we expect Front Row to contribute greater than $32 million in revenue and $8 million in EBITDA. Also on December 31st, we secured a $58.5 million loan from White Hawk Capital Partners, providing funding to complete the Front Row acquisition, refinance existing debt with Sally Port Commercial Finance and Lynn Global Asset Management, and allow for general working capital. The facility provides an additional $10 million in borrowing, During Q4, we published seven case studies that detail the successful implementation of BoxLight solutions in a broad range of education and enterprise environments. They included Corriedale Academy and Cardiff Metropolitan University in the UK, Ord Public Schools and Phoenix Unified High School District in the US, and Star Car Rental in Germany. One of our case studies featured our strong relationship with Clayton County Public Schools, the fifth largest school district in Georgia. We are working closely with Clayton County to provide teachers and staff with customized training and support and have renewed our professional development contract with the district for a third year. Another success story showcasing our utility in higher education featured Joseph Chamberlain College in the UK, which upgraded from underperforming competitor screens to our impact interactive panels and CM series digital signage displays, along with CleverTouch Live, our flexible and customizable content management platform. Our case studies and success stories reaffirm our dedication to be a trusted ally for our customers by providing turnkey solutions that are cutting edge, comprehensive, and can be fully integrated into diverse communication environments. Adding to the many accolades we have received from industry leaders, our CleverTouch brand won two awards during Q4 at InfoComm 2021. Best in Show for the Impact Plus interactive touchscreen, and Best in Show digital signage for CleverTouch Live. We continue to innovate and release several product updates and feature additions that differentiate us from the competition, including a new generation of interactive and non-interactive flat panels, enhancements to our Mimeo Connect blended learning platform, improved tools to our Lynx whiteboard annotation and lesson plan software, the ability to access our Clever Store 3 education app via a web browser, additional screen sharing tools using Clever Share 5, and the addition of sensor technologies to monitor air quality and meeting spaces, among others. Of course, our success to this point, along with our ability to continue to deliver growth and profitability, is a direct result of our talented and dedicated employees and our supportive channel partners. With that, I will now turn the call over to our president, Mark Starkey, to provide additional insights.

Thank you, Michael. And I'd like to say happy St. Patrick's Day to everyone on the call. Q4 was another record quarter for BoxLight, and I'd like to take this opportunity to thank all our staff and our customers who have helped contribute to our success during the quarter. During Q4, we booked $42 million of orders from our partners, up from $33 million for the same period last year. That represents organic growth of 25% year-on-year. For the full year, our order intake was $216 million, compared with $57 million in 2020, representing 283% year-on-year growth. Some of our key orders received during the quarter included $3.1 million from UnicDK in Denmark, where we retain our number one market share position, and 23% share of interactive displays. In the US, we had significant orders from Bloom, previously Trox, for $2.6 million. Central Technologies, based in Tennessee, for $2.5 million. DMH Distributing, for $2.2 million. $1.9 million from ACT, Advanced Classroom Technologies, and $0.9 million from Data Projections in Texas, to name but a few. Overall, our market share of interactive displays in the U.S. has more than doubled over the past two years to greater than 7%, according to FutureSource. In Australia, we continue to hold the largest market share with 26% of total IFPDs sold and received a further $2.2 million of orders from our partner, ASI. In France, we received $1.3 million of orders from our partner, Speechy, And in the UK, where we have 16% of the IFPD market share, we received orders from over 100 partners, including $1.1 million from Roche AV and $0.9 million from IDMS. This highlights the quality and diversity of our customer base, especially across the US and EMEA. We are also developing very successful partnerships in Australia, South Africa, and South America, During Q4, we also had our first major win in Japan, where our clever touch solution was selected for ease of use with the students' Apple devices. In Russia, we have temporarily suspended our business relationship with our partner in St. Petersburg, although we do not expect any significant impact in our revenues and growth as a result of the war in Ukraine. As previously mentioned, in September 2021, we signed the exclusive contract with Trox, now Bloom, which was a merger between our two largest partners, T&E and Trox. The contract gives Bloom exclusive rights to sell Clevertouch in 49 of the 50 states in the US and Canada. Q4 was our first quarter of trading with the new contract, with a number of salespeople who are actively selling Clevertouch in the US, increasing substantially from 40 heads to over 200 heads. I can now report that our sales pipeline has expanded significantly with Bloom and currently stands at over $20 million of qualified opportunities. CleverTouch is now being actively sold in all 50 states, including Canada, whereas just a few months ago, CleverTouch was only present in 20 states. This means that both of our IFPD brands, Mimeo and CleverTouch, are being proactively sold across all states in the US by our channel partners. The acquisition of Front Row fits very well into our portfolio and gives us a fantastic audio solution for the K-12 marketplace. We expect that the acquisition will be accretive to our collective revenue and, more importantly, to our gross profit, which we anticipate will continue to improve throughout 2022. As a result of the increase in gross profit margins, along with top-line sales growth, We expect $26 million in adjusted EBITDA this year. That equates to more than 29% organic growth in adjusted EBITDA for 2022. In terms of end users, we had another quarter of fantastic wins. One notable win was with Midland ISD in Texas, where we continued the rollout of clever touch panels across the whole school district. In total, we expect Midland ISD to take over 4,000 screens. Midland continued to buy our solution predominantly because of our clever message solution, enabling the schools to push alerts across the district. In Switzerland, we received an order via our local partner for 150 86-inch Impact Plus screens from the city of Goso. They noted that the CleverTouch MDM solution was the main reason for selecting our screens. Our STEM business is also starting to gain traction as COVID restrictions begin to ease. In Poland, we received an order for 370 3D printers, including My STEM Kit platform, activity and curriculum content to be supplied to schools across the country. There are 13,000 schools in Poland and each school is required to have at least two 3D printers. Our solution was recommended to the Polish educational authorities and we expect further significant orders in the coming quarters. Our software ribbon use continues to rise as we pursue a dual strategy of selling our Mimeo and Octopus software under SAS and OEM agreements to customers such as Samsung, Uline and school districts, as well as embedding our Mimeo and Clevertouch software solutions into our own products. Our Octopus OEM software revenues increased from 0.7 million in 2020 to 1.3 million in 2021, an increase of 90% year on year. And sales of Mimeo software increased from $96,000 in 2020 to $1 million in 2021, following our first order of Mimeo Connect in March 21. Combined, our software revenues grew by over 200% from 0.8 million in 2020 to 2.4 million in 2021. We also launched a new cloud-based version of Lynx Whiteboard in September 21 and have had an unprecedented response. Using Google Analytics, we know that in the past five months since launch, we have had 523,000 live sessions on Lynx with an average duration of 54 minutes each. That equates to more than 53 years of lessons being delivered on our platform in the first five months since Lync Whiteboard was launched. We are therefore confident of delivering more than one million lessons over the Lynx platform in its first year. And we will look at the best ways to monetize the solution moving forward. Ultimately, the fact that we own a growing suite of software IP enables us to differentiate our products from the competition. In summary, Q4 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 Q1. With that, I will now turn the call over to our CFO, Patrick Foley.

Thanks, Mark, and good afternoon, everyone.

To further expand on what you've already heard from Michael and Mark, I'd like to add a few figures to provide context to BoxLight's international operations. So revenue by country and region, our total revenue in Q4 was $44 million. EMEA was 55%, $24.3 million, of which the UK represented 34%. The Americas, 38% or $16.5 million. and the rest of the world, 7%, $3.2 million, which was mainly Australia. The top 10 customers represent approximately 44% of total sales in Q4, with the single largest customer at approximately 9%, and these are based across a number of markets, namely the US, Denmark, Australia, Finland, France, and Spain. The top 20 customers represent approximately 57%, where the mix is slightly different to previous quarters, where this was running around 66%. For our sales product mix and margins, in Q4, hardware remained the largest proportion of total revenues at 91%. These were largely sales of interactive flat panel displays and represented 90% of this total, with the related accessories being the balance of 10%. The balance of all our total revenues coming from software, services, and STEM solutions. Gross margin for the quarter was 21.2%. The IFPD margin was about 20%, which would be slightly higher. However, as previously reported, with increased global shipping costs, where we're still seeing four times normal rates, have reduced margins by up to four percentage points. We anticipate the higher costs will remain. As noted in previous quarters, We have experienced some supply chain challenges, including interruptions to inventory production schedules as suppliers continue delays in shipping and receiving goods. We've seen manufacturing costs increase due to these issues, which have impacted gross margins. In Q4, the education sector represented 91.5% of all interactive display sales, with about 73% of these were 75-inch and 86-inch panels. which follows the consistent trends we have seen throughout 2021. I will now review our fourth quarter results. The financial results for the three months ended December 31, 2021. Revenues for the three months ended December 31, 2021 were $44 million, as compared to $31.9 million for the three months ended December 31, 2020, resulting in 38% organic growth.

Gross profit for the three months ended December 31, 2021 was $9.3 million as compared to $3.6 million for the three months ended December 31, 2020.

The gross profit margin for the three months ended December 31, 2021 was 21.2% which is an improvement of 100 basis points compared to the three months ended December 31, 2020. Gross profit margin adjusted for the net effect of acquisition-related purchase accounting was 28.1% as compared to the 26.4% as adjusted reported for the three months ended December 31, 2020. As reported in previous quarters this year, gross margins have been adversely impacted by approximately four percentage points due to increased freight and customs costs caused by supply chain challenges associated with the effects still of COVID-19. Additional pressure on margin has been seen on the cost of manufacturing, which has led to an adverse impact of approximately 4% in the quarter. Total operating expenses for the three months ended December 31, 2021 were $14.9 million as compared to $11.1 million for the three months ended December 31, 2020. The increase primarily arose from headcount and other related overhead expenses and significant one-time costs related to the Front Row transaction and Whitehawk financing. Other income expense for the three months ended December 31, 2021 was net expense of $2.2 million as compared to net expense of $1.9 million for the three months ended December 31, 2020. Other expense increased primarily due to $1.6 million losses recognized upon the settlement of debt obligations. The company reported net loss of $7.1 million for the three months ended December 31, 2021, as compared to a net loss of $8.6 million for the three months ended December 31, 2020. The $7.1 million loss includes more than $1.5 million of costs associated with Whitehawk financing and front row transactions, as well as the retirement of the Lind and Sallyport debt. The net loss attributable to common shareholders was $7.5 million and $8.9 million for the three months ended December 31, 2021 and 2020 respectively, after deducting the fixed dividends to Series B preferred shareholders of $317,000 in 2021 and $338,000 in 2020. Total comprehensive loss was $6.9 million and 3.2 million for the three months ended December 31, 2021 and 2020, reflecting the effect of cumulative foreign currency translation adjustments on consolidation, with a net effect in the quarter of $275,000 gain and $5.3 million gain for the three months ended December 31, 2021 and 2020, respectively. The EPS for the three months ended December 31, 2021 was $0.11 loss per basic and diluted share compared to $0.17 loss per basic and diluted share for the three months ended December 31, 2020. EBITDA for the three months ended December 31, 2021 was $5.1 million loss as compared to $6.4 million EBITDA loss for the three months ended December 31, 2020. Adjusted EBITDA for the three months ended December 31, 2021 was a $2 million loss as compared to a $356,000 loss for the three months ended December 31, 2020. Adjustments to EBITDA include stock-based compensation expense, gains losses recognized upon the settlement of certain debt instruments, gains losses from the re-measurement of derivative liabilities, and the effects of purchase accounting adjustments in connection with acquisitions. At December 31, 2021, BoxLight had $17.9 million in cash and cash equivalents, $53.4 million in working capital, $51.6 million inventory, $201.4 million in total assets, $52.5 million in debt resulting from our new White Hawk debt facility net of debt issuance costs of circa $7.1 million, $53.3 million in stockholders' equity, 63.8 million common shares issued an outstanding and 3.1 million preferred shares issued an outstanding. The financial results for the 12 months ended December 31, 2021. Revenues for the 12 months ended December 31, 2021 were $185.2 million as compared to $54.9 million for the 12 months ended December 31, 2020. resulting in a 237% increase due primarily to the acquisition of Sahara in September 2020 and increased demand of our solutions. Gross profit for the 12 months ended December 31, 2021 was $46.5 million as compared to $9.9 million for the 12 months ended December 31, 2020. The gross profit margin for the 12 months ended December 31, 2021 was 25.1% compared to 18% for the 12 months ended December 31, 2020. Gross profit margin adjusted for the net effect of acquisition-related purchase accounting was 26.8% as compared to 27.1% as adjusted reported for the 12 months ended December 31, 2020. And as reported in previous quarters this year, Gross margins have been adversely impacted by approximately four percentage points due to increased freight and customs costs caused by supply chain challenges associated with the effects of COVID-19. And this is anticipated to continue into 2022. Additional pressure on margin has been seen on the cost of manufacturing as a result of component shortages, which have had an adverse impact of approximately 3.9% in the 12 months to December 31, 2021. Total operating expenses for the 12 months ended December 31, 2021 were $49.1 million as compared to $22.6 million for the 12 months ended December 31, 2020. The increase primarily resulted from additional overhead costs associated with the full year cost of the acquired Sahara operations in September 2020. Other income and expense for the 12 months ended December 31, 2021 was net expense of $7.9 million as compared to net expense of $4.3 million for the 12 months ended December 31, 2020. The increase in other expense was primarily due to $4.9 million of increased expense due to losses recognized upon the settlement of certain debt instruments. The company reported a net loss of $13.8 million for the 12 months ended December 31, 2021 as compared to a net loss of $16.2 million for the 12 months ended December 31, 2020. The net loss attributable to common shareholders was $14.7 million and $16.5 million for the 12 months ended December 31, 2021 and 2020, respectively. After deducting fixed dividends to Series B preferred shareholders of $1.3 million in 2021, And the fair value revaluation deemed contribution of $367,000 following the redemption amendments with the Series B shareholders, which was signed June 14, 2021. Total comprehensive loss was $15.3 million and $10.9 million for the 12 months ended December 31, 2021 and 2020, reflecting the effect of cumulative foreign currency translation adjustments on consolidation. With the net effect year to date, of $1.5 million loss and $5.2 million gain for the 12 months ended December 31, 2021 and 2020 respectively. The EPS loss for the 12 months ended December 31, 2021 was $0.23 loss per share compared to $0.39 loss per share for the 12 months ended December 31, 2020. EBITDA for the 12 months ended December 31, 2021 was a gain of $66,000 as compared to an $11.6 million loss for the 12 months ended December 31, 2020. Adjusted EBITDA for the 12 months ended December 31, 2021 was $12.1 million as compared to a loss of $1 million for the 12 months ended December 31, 2020. Adjustments to EBITDA include stock-based compensation expense, gains losses recognized upon the settlement of certain debt instruments, gains losses from the re-measurement of derivative liabilities, and the effects of purchase accounting adjustments in connection with acquisitions. And with that, we'll open up the call to questions.

Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone now. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press star 1 on your phone now. Please hold a moment while we poll for questions. Your first question is coming from Slatbeck with HC Wainwright. Your line is live.

Hey, guys. It's Scott Buck. How are you doing? I appreciate the time. My first question, I'm just curious if you could talk a little bit about the levers you might have to pull to combat, you know, not just the supply chain headwinds, but, you know, now we're dealing with inflation as well.

Yeah. So, so, so both of course challenges, you know, so, uh, you know, we've been dealing with supply chain challenges, of course, you know, for a couple of years now. So that's something that, that we feel like we have a relatively good handle on, on what the expectations are. The hope is I'll start to improve, but, but we're not planning on that in the near term. Um, but, uh, but, but we're managing that with, you know, better planning. And in addition to that, with the new credit facility we brought on. So, so you remember we brought on Whitehawk, uh, as our new lender, $58.5 million was at closing, but we have access to another $10 million facility to help with growth, and that's going to help us start to bridge that gap. But then also, we're turning the corner. To this point in time, we've gotten to where we are, even with dramatic growth, but needing to spend cash to get where we are, and this is the year where we start to turn the other way, and we're going to start to bring in positive cash flow, and the cash from the business will start to fund the business going forward.

Yeah, that's helpful, Michael. And on the competitive environment, you know, very nice looking guide for 2022. Do you guys have a sense of, you know, what is the pie getting larger versus you guys taking a larger piece of the pie?

Yes, we're seeing both of that. So the pie absolutely is getting larger. This last year, there was dramatic growth specifically in interactive flat panels, which is the majority of our business, as you heard, but also growth in other categories as well. And that's going to continue in this year. We look at research that comes in from FutureSource Consulting, and they show that their expectation is growth of nearly 20% in the U.S. And in EMEA, it's closer to around 10 points. But globally, we're looking at, based on our growth, we're going to be in the teens for industry growth. So if we can grow like the market, we got to grow in the teens. If we can take some market share from competitors, we can grow quite a bit faster. And we have been doing that to this point. If you look at the research that comes out of FutureSource, they show the percentage of the market that we have. If you go back a couple of years, we were low single digits. We've over and doubled that in the last couple of years. And now we're north of seven points of the total interactive flat panel display market, excluding China. Now we hope within a short number of years, we're going to be up, you know, definitely well north of 10 points as high as the teens or as high as 20, which would be about where our largest competitor is there. They're about around 20 points of the total market.

That's really helpful color. And then last one for me, uh, just on the operating costs going forward, what should we think of as kind of run rate affects here? you know, maybe fork you pulling out those one timers.

Yeah. So there'll be a number of different things in terms of that.

When you see, you'll see the financials as we are publishing, um, the run rates going forward will have, um, obviously a greater, um, amortization, uh, piece, uh, now included in our OPEX as we move forward, post the completion of the front row transaction. So we will have an increased OPEX, but it will actually, from an adjusted EBITDA perspective, obviously, we'll be backing out. So it'll be pretty consistent quarter on quarter going forward now. So obviously, Q4, we had a slight anomaly and a slight up. So it will kind of normalize slightly. Our normal range going forward will be slightly below that on a quarter basis on a normal OPEX, but there will be increased amortization as a result of the recent purchase. Got it.

That's very helpful. I appreciate the additional color, guys. Congrats on the quarter. Thank you.

Thank you, Scott.

As a reminder, ladies and gentlemen, if you have any questions or comments, please press star 1 on your phone now. Your next question is coming from Byron Mayo with 1031 Private Exchange Group. Your line is live.

Hi. Hi. Congratulations on your increase in sales over projections. That's very nice. I know you expected the gross margins to improve as your sales volume and economies of scale progressed. I'm wondering, looking over the next year or two, where do you see gross margins once sort of supply is sort of mediated, remedied?

Yeah, I appreciate the question, Byron. So a couple of thoughts on that. One is, as a business, we're focusing more and more on our solutions outside of interactive flat panels. Today, you know, ISPDs are around 80% of our business, as you heard. and we're looking at selling a lot more of accessories, including the audio solution we brought on with Front Row. It's selling other classroom solutions. Beyond that, we have our software solutions. We focus on STEM, of course, science, technology, engineering, and math. We have several solutions there. We have our professional services team. But all of these other solutions are high margin. Most of those are 40-plus points of margin, and in some cases, 50-plus points of margin. So as our product mix improves and we're less – concentrated in interactive flat panel displays, our margins will absolutely improve. So that's one focus. A second one is growing our enterprise vertical. Today, you know, we're 90%, as you heard, education. We're focusing on enterprise. That's a growing opportunity. We've won some really great opportunities actually over the last few months. And we built out our team, which is larger now, focusing on enterprise. And enterprise margins are typically substantially higher, in many cases 50 points of margin, even on hardware and enterprise. So as we start to be more successful there, you'll see the margins improve. But then also with scale, we're going to be better at buying. That's going to help as we build out our broader solutions. As we've been doing, we're able to charge higher prices. And so we're looking wherever we can to increase prices. That can improve margins. And then hopefully as the economy improves, As the cost of manufacture comes down some, as logistics costs come down some, then that will affect those margins as well. But if you're looking at a couple years, we really ought to be north of 30 points. And I think optimized with a total solution like we're selling today, in several years forward, we ought to be probably close to around 40 points of margin. That's where we'd like to be eventually. But in the short term, maybe expect some small upticks over the next few quarters as we start to realize these different opportunities.

Oh, that's a great answer.

Thank you so much. One last question. One last question. So just quickly, so obviously we just filed our kind of Super 8K from the completion of Front Row. So when you look at the financials on that, that's in the attachments. You'll see also in the margin mix as we change going forward, it's a very profitable business. So the margin mix will lift naturally as a result of that inclusion as well as we move forward. And then secondly would be the points we've previously made in other quarters about, you know, increasing prices which we have done and passed on and that's now improving margins as we go and also our purchasing power obviously the volume of our interactive flat panels that we're now selling throughout the world has increased enormously so it's giving us good leverage for discussions and continued discussions with our manufacturers thank you thank you one last question too and that is in growth through acquisitions are you guys eyeing any potential acquisitions the

Like front row, anything on the table possibly going forward to expand your horizontal or vertical?

Yeah, so at our scale now, we've come a long way in the last couple of years from a little $30 million company to now, we're talking about being a $250 million company. And with that scale, we're a lot more noticed in industry. So we see a lot more opportunities now than we did in the past. And I would say on a weekly or every couple of weeks, We see a potential new opportunity, not necessarily because we're pursuing it. It's because a lot of these companies come to us. They see what we're doing. They're seeing our growth, and they want to be part of it. Now, we're not actively looking. Right now, the focus is largely on taking advantage of the companies we brought together, focusing on the strong revenue growth, focusing on improved profitability. However, if the right opportunity came along, of course, we would look at that. And, of course, the economics would have to be right as well, like they were with Front Row. The economics were amazing with Front Row. We bought Front Row for less than four times EBITDA. It's going to pay for itself very, very quickly. So, you know, if the right opportunity again came along, we would look at it, but we're not actively pursuing many opportunities and feel like we have the right suite of products and the solutions in-house today, and we're going to take advantage of that.

Thank you. The other thing I'd highlight, Michael, was actually the synergies. between front row and the rest of our business. So what we actually see is we can integrate the solutions from front row into the rest of our solutions, and actually we get one plus one equals more than two, right? So our customers can see better, more integrated solutions, and we think that will give us a big differentiation in the marketplace as well. So the front row acquisition's only just been completed, but we're very positive what's gonna happen over the next 12 months there.

Yeah, great points.

Your next question is coming from Brian Kinslinger with Alliance Global Partners. Your line is blocked.

Great, thanks. Thank you. Since you did file your Super 8K, can you remind us what the gross margins are for front row? And then what is the combined gross margin implied in your $26 million EBITDA guidance?

Yes, so if you look at the thing, it's approximately 50% gross margin on our front row acquisition, and you'll see that on the historical financials, and that will continue going forward. So on a mixed basis, you'll see that that would, on average, lift the margins as reported to about 27%. So as we increase and improve the margins on the interactive flat panels and the mix of other products coming in, that will increase as well. Great.

That's helpful. And then you mentioned your new exclusive agreement with Trox that started at the beginning of October. It's been now probably almost six months. So I'm curious how that's working. First of all, are you gaining market share of Trox sales? And then second part of that, how do you see Trox selling your solution versus others? Are they selling yours a lot more? Are they even selling competitors' solutions now that they're differentiated? Just take us through how you're seeing that market play out. Yeah.

Michael, do you want to lead with this one or do you want me to take this one?

Yeah, go ahead, Mark, and I'll jump in if needed.

Yeah. So, look, it's been five months since we signed that exclusive contract with Bloom, as they are now called. And We had to go through a process of actually working out exactly how this is going to work because previously we had about 40 sales guys from Tierney that were selling Clevertouch. And now we're interacting with about 200 sales guys from Bloom. And they're selling not just Clevertouch, they're selling other competitor screens as well. But we are getting a lot of buy-in from their sales guys, a significant amount of buy-in. I mentioned on the call that we have over $20 million of qualified leads in the pipeline. I think we're going to have an exceptional year with Bloom. The relationship's very good, very strong, and we see huge opportunities there. And we're also doing Mimeo deals with them as well, right? So it's not just Clevertouch. We're still selling a lot of Mimeo. And we'll take whatever is the right solution to each customer, we will take Um, but it is a, they're our number one customer, right? So they're very important to us.

Can you remind us what, uh, your quantify actually the revenue from your trucks interior relationships in 2021? I mean, you just said $20 million of qualified leads. How does that compare to actual revenue generated in 2021?

Pat, do you have that number the full year? Sorry, say again for me.

Sorry, excuse me.

No, sorry. I'm interested in the revenue from Tyranny and Trox relationships in 2021.

Yeah, I've clearly got it. I'd have to kind of pull in. It would probably take time to actually get back a lot. I can take a lot of lines separately with you here.

Yeah, so Brian, to give you an idea, so Bloom, as they're called now, was approximately 9% of all of our sales in Q4. So they're single digit, but they were our largest customer in Q4. For the full year, it's going to be single digit, right? They're not going to count for more than 10 points, but it's significant. It's going to be probably high single digits in the percentage.

Which I assume was much lower if we look at all year 2021. Is that accurate?

would have been significant in for the full year as well but but it is growing you know we we set growth targets uh with bloom they're hitting those targets so we are seeing good growth but it would have still been significant um yeah for for full year 21 as well as for your full year 20. okay lastly um sorry so on that point the 20 million

of outlook is obviously what we see kind of in the next three to four months in terms of order intake right so it's not the full it's not like a year's outlook all right thank you for a clarification um lastly since covid excuse me um we've talked about the federal stimulus money um you know there's been some so much money at central k through 12. where are we with that are we still another year or two's worth of this being a catalyst in the United States? Just kind of take us through where we are in that timeline.

Yeah, that's right. So the stimulus money that was applied to education for ESSER funds, there was ESSER I, II, and III, so three tranches. The bulk of that came in ESSER III, and that money is being spent now. We're getting orders where we know, in fact, they are spending that money, and they have been accelerating that. technology implementations because they have are getting the money, but that money is going to last through 2024. That's expectation. It could potentially go beyond that. A lot of times, uh, the, the, the deadlines get extended. They did on the previous tranches, but right now the expectation is that money would be spent through 2024. And that's why if you look at most industry projections, they're going to see, you know, high growth in the U S and sales of education technology, And then come 2025 is going to flatline for a little bit before it starts to go up again.

Is that, um, is there a number such as there's X billion dollars of money in stimulus money over that time period? Or is that unclear necessarily how much money is available?

No. Yeah, it's clear. Yeah. So it was, uh, it was approximately, it was just shy. 200 billion is about 190 billion was the total. of that $190 billion, I believe, and I have to pull you the amount. I want to say it was $120 billion, something like that, of the $190 was the last tranche. But I can get to that to you, Brian, because that's all public. Probably a quick Google search of ESSER funds education will have it pop up. But again, about $190 billion total, the largest tranche of that, the majority of that $190, again, is going to last through 2024.

And when was that, sorry, did you say that? When was 120 released?

Well, so let me look real quick. Let's see if I can pull it up because I want to make sure I give you the right number here.

The other key thing, Brian, is, and I know Michael mentioned this before, is what you're really going to see, the biggest growth, obviously the next couple of years, we're going to have significant growth in the education sector. But what we're starting, and we're really seeing this, corporate is going to really start to take off. And in most meeting rooms, in any corporate environment, it could be public sector or finance, banking, whatever, in those meeting rooms, they generally have non-interactive screens. And what we're going to see, especially with the likes of Teams, Zoom, the way people are interacting these days, we are seeing those meeting rooms being moved over to an interactive technology. So we're going to see the growth rate in what we call corporate or enterprise really significantly ramp up. And, you know, within three to five years, we expect the market there to be as big as the market in education.

Yeah.

And so back to your question, I was giving the K-12 numbers, which we track, you know, the majority of our education is K-12, but it was much higher. So the total education number was, 13 billion or no, it was 31 billion in March of 2020, another 82 billion that was approved in December 2020, and then 168 billion, which was approved in March of 2021. So that's, do this in my head here. That would be 280 billion is the number. So you got $280 billion to education. Now of that, education for those tranches, again, March 2020, December 2020, March 2021, the K-12 education portions were $13 billion, $54 billion, and $122 billion. So that's that kind of roughly $120. Now, of the first, which was the CARES Act, was the $13 billion. You remember when the CARES Act came out, that had the $13 billion. And then you had the December COVID relief package, that $54 billion. A lot of that's been spent. The CARES Act money has been essentially spent I believe that the bulk of the ESSER funds too have been spent. But a lot of, again, this $122 billion for K-12 education is still out there. There's an application process and it's a little bit of paperwork for the school districts to access the funds. And the funds, by the way, they're allocated from federal government to states and then the states allocate to the schools. But that is all happening as we speak. And even just last week, I know that we brought an order in that we were told they were using ESSER III funds.

Great. Okay. Thanks so much. Yeah, absolutely.

Thanks, Brian.

We have no further questions from the lines at this time. I would now like to turn the floor back to Michael Pope for closing remarks.

Great. Thank you, everyone, for joining the call and for your support to the 2021 earnings call. We look forward to speaking to you again in May when we report our Q1 2022 results.

Thank you, ladies and gentlemen. This concludes today's conference call. You may disconnect at this time and have a wonderful day. Thank you for your participation.