Boxlight Corporation

Thank you, and welcome to the BoxLight Third Quarter 2022 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 expectation as of today and are subject to certain risks and uncertainties and may cause the actual results to differ materially from the forward-looking statements. A detailed discussion of such risks and uncertainties are contained in the company's most recent Form 10-K, Form 10-Q, and other reports filed with the SEC. the company undertakes no obligation to update any forward-looking statements. On this call, management will refer to non-GAAP measures that, when used in combination with GAAP results, provide additional analytical tools to understand the company's operations. The company has provided reconciliations to the most directly comparable GAAP financial measures in the earning press release, which will be posted on the investor relations section of the company's website at boxlight.com. And with that, I'll hand the call over to BoxLights Chairman and Chief Executive Officer, Michael Pope.

Hello, everyone, and thank you for joining. Also on the call are Mark Starkey, our President, and Greg Wiggins, our Chief Financial Officer. Mark is joining us from London, and Greg and I are joining from our corporate office here in Atlanta. The third quarter was our strongest to date with $69 million in revenue and $10 million in adjusted EBITDA. Revenue grew by 13%. and adjusted EBITDA by 38% over the same quarter last year. We have delivered double-digit or greater revenue growth for eight consecutive quarters and continue to gain meaningful market share globally. Recent movements in foreign exchange rates have impacted our financial results, specifically the weakening of the pound and the euro against the US dollar. If foreign exchange rates had held constant during the quarter, we would have reported greater than our guidance of $70 million in revenue and $10 million in adjusted EBITDA. Our gross profit margin for the third quarter improved to a record 31%, a dramatic increase over our Q1 gross margin of 25% and Q2 gross margin of 28%. The improvement was largely a result of additional decreases in supply chain and logistics costs. We expect gross profit margin greater than 30% for the fourth quarter. For both the three and nine months ended September 30th, for the first time as a company, we generated positive cash flows from operations. We also ended the quarter with an improved balance sheet, including $22 million in cash, $49 million in inventory, and $62 million in working capital. Our debt balance as of September 30th was $59.2 million. However, subsequent to quarter end, we made a principal payment of $4.25 million, reducing our current debt balance to $55 million. We're expecting only modest growth in the fourth quarter and have revised our guidance to $48 million in revenue and $2 million in adjusted EBITDA, resulting in our full-year guidance of $227 million in revenue and $18 million in adjusted EBITDA. Our full-year guidance represents revenue growth of 23% and adjusted EBITDA growth of 49%, over the full year 2021. Although we have experienced slowing demand in recent months, we still expect to deliver double-digit revenue growth in 2023 and significant improvement to our gross profit and adjusted EBITDA margins. We are a global company with offices across the United States, Western Europe, Canada and Australia. Today, we have nearly 300 employees and full-time contractors, including over 100 individuals in our sales organization that manage hundreds of channel partners with thousands of sales representatives across the globe. We also have over 100 employees and full-time contractors in our R&D, professional development, and customer service teams that develop, deliver, and support our complete lineup of hardware, software, and service solutions. Earlier this year, we introduced our new generation interactive Slack panels and sizes ranging from 55 inches to 98 inches under our brands Clever Touch and Mimeo. Our current touch screens have been our most successful solutions to date with upgraded hardware and software, including Android 11, upgraded speakers, USB-C inputs with hardware optimization, multi-user profiles and launch screens, our Clever software portfolio, and compatibility with Google Classroom and cloud accounts. During the third quarter, we launched our all-in-one LED video walls with sizes ranging from 120 inches to 220 inches. We also introduced our Clever Hub wireless presentation system with built-in digital signage capability and touchscreen functionality designed for video conferences, meeting rooms, classrooms, and training rooms. Our interactive and non-interactive displays, video walls, and media players all come enabled with our Clever software assets CleverStore, CleverShare, and CleverLive. CleverStore is our cloud-based app store with hundreds of vetted applications. CleverShare is our collaboration tool providing enhanced screen sharing and screencasting functionality. And CleverLive is our digital signage software platform enabling the creation, deployment, and management of content across multiple displays in any location. and the ability to send out alerts and messages integrated with our front row audio solution for campus communication. During the quarter, we also pushed significant updates to our education platforms, Lynx Whiteboard and Mimeo Connect. Lynx Whiteboard is a cloud-based software tool that provides for whiteboarding, lesson plan creation and delivery, and student collaboration across multiple platforms and devices. It is available free of cost for download on every major app store. Today, we have nearly 200,000 registered users and 25,000 monthly active users on Lynx Whiteboard that are engaging with over 100,000 monthly sessions. Our Mimeo Connect blended learning platform is the most feature-rich solution on the market for virtual and hybrid learning. During the quarter, we added several additional features, including the ability for students to add and save their own annotations and notes to instructor lessons, teacher functionality to view student work live as well as share students' work, screens, or notes to the front of the class display, student polling via text messages, and enhanced STEM lessons with set math and science simulations. During the quarter, we launched our first pilot of Mimdale Connect with a large school district, and we expect meaningful monetization of the platform with several school districts beginning next year. In December of last year, we announced the acquisition of Front Row, adding robust audio and campus communication tools to our product line. We continue to integrate Front Row solutions into our broader solution suite and have since introduced our integrated AV campus communication system under the brand Attention. Attention enables announcements, bells, and alerts to be delivered as both audio and video simultaneously across the school. This new integration makes communicating in school campuses significantly easier, including emergency communications. We continue to receive recognition for our solutions, and during the third quarter, we earned 11 Best for Back to School 2022 awards from Tech and Learning. The solutions awarded include Mimeo Pro 4, Clever Lives, Mimeo Connect, My STEM Kits, EOS Education, and Attention by Front Row. With that, I will now turn the time over to our president, Mark Starkey.

Thank you, Michael. Despite strong inflationary headwinds, record drops in the value of the euro and sterling, and recession fears across EMEA, we still managed to achieve a record quarter of both revenue and profit in Q3. For that, I must 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 $44 million of orders in the quarter, which is down 14% on Q3 last year. However, on a year-to-date basis, the value of orders booked for the first nine months of this year is $191 million, compared with $179 million booked in the first nine months of the previous year, representing 7% year-on-year growth. On a local county basis, the growth rate is much higher as the EMEA business has been impacted by the significant devaluation of both Euro and Sterling. We are now forecasting more than $220 million order intake for this financial year. Our largest customer in Q3, in terms of order intake, was Bloom in the US, with $5.9 million of orders received. Our organic growth in the US has been very significant. and we anticipate more than 130% growth in gross profit for the full year in the US. In terms of other key customers in Q3, we received $2.2 million of orders from Cameramundi, our partner in Puerto Rico, $2.1 million from Graphics Distribution, our US distribution partner, $1.6 million from Central Technologies in Tennessee, and $1.4 million from D&H Distributing. Bischoff AG in Switzerland was our largest customer in EMEA, placing $1.5 million of orders in the quarter. We received $1.4 million of orders from UnicDK in Denmark and $1.1 million from IDNS in the UK, to name a few. Overall, the US accounted for 44% of our orders booked during Q3, with the UK accounting for 26%, Europe excluding the UK accounting for 24%, and the rest of the world, 6%. In Q3, 67% of our revenues came from sales of interactive flat panels, both Mimeo and Clevertouch, with our front row audio solution accounting for 8% of revenues and 14% of gross profits. Our market share of IFPDs in the US increased from 5.3% in Q1 to 8.4% in Q3, according to the latest report from FutureSource. Our market share in Europe was similar and increased from 5.6% in Q1 to 6.6% in Q3. We remain in the top two IFPD providers in the UK with 14.4% market share. We continue to be the top two brands for market share in Ireland, Australia, Austria, Sweden, Finland, Denmark, Belgium, Switzerland, and South Africa. Our biggest opportunity for significant growth remains in the US, where we are ranked number five with an average market share of 6.6%, and Germany, where we are ranked number seven with 4% market share. In terms of market size, the US market for IFBDs is estimated to be worth $2.2 billion in 2022, according to FutureSource. The market in EMEA is slightly smaller and estimated to be worth $2 billion. Overall, this gives us an addressable IFPD opportunity in our two key markets of about $4.2 billion. Given that we have single-digit market share, we believe we have 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 Puerto Rico, we received orders for more than 2,000 Mimeo Pro4 screens. to be supplied to schools right across the territory. And we expect to win another 3,000 screens in the imminent future for both interactive and non-interactive solutions. We also won a tender to provide more than 500 Mimeo Pro 4 screens in Port Arthur, Texas. The solution included a rollout of professional development to help the school district implement the technology. In Germany, we had a fantastic tender win in Düsseldorf with a minimum requirement of 668 86-inch Impact Max screens, but with potential for over 1,000 screens to be supplied over the next two years. In Switzerland, we won a project to supply 650 86-inch Clevertouch screens to the canton of Ticino. They selected our Clevertouch solution against the competition based on the best product features. These are just a handful of the many projects that we won in Q3. We continue to grow our corporate teams in both EMEA and the US and develop solutions to the problems that many enterprises are having as they adapt to the new hybrid world working both remotely and in offices. In summary, Q3 was an outstanding quarter with record revenues and profitability. We believe we are well positioned to weather any potential downturn in market conditions due to our strong mix of K-12 business mixed with corporate and higher education solutions. Our focus remains on growing our business in a profitable and sustainable way by increasing our market share in the key territories that we operate. With that, I will now turn the call over to our CFO, Greg Wiggins.