Boxlight Corporation

Your conference call will begin in just a couple of minutes. Once again, thank you for holding. Your conference call will begin in just a couple Thank you. Thank you. Thank you. Thank you. Thank you and welcome to the BoxLight fourth quarter and full year 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 expectations as of today and are subject to certain risks and uncertainties and may cause the actual results to differ materially from the forward-looking statements. A detailed discussion of such risks and uncertainties are contained in the company's most recent Form 10-K, Form 10-Q, and other reports filed with the SEC. The company undertakes no obligation to update any forward-looking statements. On this call, management will refer to non-GAAP measures that, when used in combination with GAAP results, provide additional analytical tools to understand the company's operations. The company has provided reconciliations to the most directly comparable GAAP financial measures in the earnings press release, which will be posted on the investor relations section of the company's website at boxlife.com. And 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 our fourth quarter and full year 2022 earnings call. Also joining me are Mark Starkey, our President, and Greg Wiggins, our Chief Financial Officer. We reported $43 million in revenue for the fourth quarter, short of our Q4 guidance and a slight decline from our revenue in Q4 2021. The softer revenue production was a result of changes in foreign currency exchange rates and slowing demand across the industry during the second half of 2022, which we believe is a temporary lull after several quarters of substantial growth. On a constant currency basis, we in fact generated a slight revenue growth of 7% for the quarter. We also generated better than expected profitability, including $2.6 million in adjusted EBITDA, greater than our guidance of $2 million. and an improvement of $4.6 million over Q4 2021. Our strong profitability was mainly a result of our higher gross profit margin of 34%, our best result to date, and an increase of 1,240 basis points over Q4 2021. For the full year 2022, we delivered $222 million in revenue and $19 million in adjusted EBITDA. For each of the last three years, we have demonstrated consistent revenue growth, and an improving bottom line. During that time, revenue grew from $33 million to $222 million, and adjusted EBITDA improved from a loss of $6 million to positive $19 million. Much of that growth was due to strategic acquisitions. However, we also produced substantial double-digit organic growth, lifted our gross profit margins, and held operating expenses in line. During the second half of 2022, we generated $8 million in cash flows from operations, allowing us to pay down our debt facility by $8.5 million. As of December 31st, our debt balance was $50 million, which is manageable at less than 0.5 times current assets and 2.6 times our full year 2022 adjusted EBITDA. We recently announced a $15 million share repurchase program, and as our business continues to mature, we expect growing operating cash flows that we will strategically deploy to drive long-term value to our shareholders. including the repurchase of our stock during times we are trading below our intrinsic value. At December 31st, we reported a healthy balance sheet position, including $15 million in cash, $58 million in inventory, and $63 million in working capital. Our inventory position in particular is strong in each of our key markets and across all of our key products. We are expecting modest single-digit revenue growth for the full year 2023. However, we believe the bulk of that growth will come during the second half of the year. For Q1 2023, we are guiding to $40 million in revenue and $3 million in adjusted EBITDA. Our confidence in delivering full-year revenue growth is due to recent increases in both sales opportunity registrations and our overall pipeline, which are leading indicators for order intake. Additionally, there are still substantial government funds available to purchase education technology solutions, particularly in the US and select European markets. In the United States, billions of dollars of ESSER funding are set to expire, if not obligated, by September 2023 and September 2024. School districts will be scrambling to make significant purchasing decisions over the next few quarters to meet those deadlines. In the state of Texas, Governor Greg Abbott proposed the use of nearly $750 million in state funds to make school safety improvements, including technology upgrades. Our BoxLight integrated technology solution, Attention, is a prime candidate for those funds, and we are actively promoting that solution across the state. Attention combines our campus-wide paging, intercom, and emergency communication platform, Front Row Conductor, with our cloud management platform, Clever Live, and our flat-panel displays, including Mimeo Pro 4 and Clever Touch Impact Max. Although we sell our solutions globally, we are proud to be headquartered in Atlanta, Georgia. Many of our largest competitors are foreign-owned, which has come under additional scrutiny in recent quarters, particularly in the U.S. and Western Europe. Of specific concern is data security and privacy. Our software solutions that house sensitive student and user data are developed and housed in the US, UK, and Europe, and we can certify that user data is not accessible by foreign corporations or governments. We continue to offer the most comprehensive integrated solution suite on the market, and we made substantial progress during 2022 in both enhancing our existing solutions and bringing new solutions to market. In recent months, we announced our new generation interactive flat panels, digital signage displays for the U.S. market, all-in-one LED video walls, wireless presentation hubs, and substantial enhancements to our software suite, including Clever Store, Clever Share, Clever Live, Conductor, Lynx Whiteboard, and Mimeo Connect. We are leading the industry and delivering consistent innovation and are often recognized with awards and accolades. Just last month, we received 10 awards from Tech and Learning for several of our hardware, software, and service offerings, including Attention, Mimeo Pro 4, Clever Live, Robo 3D Printers, and EOS Education Professional Development Services. In our BoxLight mission statement, we articulate our vision to be the industry leader, and we fully expect to be the number one provider of interactive technology solutions in every major market where we compete. We also recently updated the last paragraph of our mission statement to read, We strive to be a trusted partner to our customers, vendors, investors, and employees, and to earn a fair profit while embracing ethical, diverse, and inclusive business practices. We stand by our commitment to be a trusted partner to all stakeholders. Additionally, in unison with our diversity and inclusion committee, our executive team has put the topic of diversity, equity, and inclusion at the top of our strategic planning for 2023. Per a recent McKinsey study, a diverse and inclusive culture enables us to enhance our creative thinking, problem solving, and ability to deliver deeper connections with partners and customers. And ethically diverse companies are 35% more likely to outperform their peers. Also, per a recent Deloitte study, companies with an inclusive culture are two times as likely to meet or exceed financial targets, six times more likely to be innovative, and five times more likely to anticipate change and respond effectively. Our greatest asset as a company, our key competitive advantage is our people. We have successfully hired and retained the best employees in the business, many of whom came from our competitors. And I'm proud to work with talented, dedicated, and loyal employees that believe in our company vision and are committed to make it a reality. With that, I will now turn the time over to our president, Mark Starkey.

Thank you, Michael. We booked $39.6 million of orders during Q4, down 4.6% on Q4 last year. The decrease in orders is primarily due to a general slowdown post-pandemic, and we expect future orders to more closely follow the traditional EdTech phasing, with order intake stronger in Q2 and Q3. For the full year, our order intake was $225 million, compared with $216 million in 2021, representing 4.2% year-on-year growth. Our focus remains on building a strong, profitable business and improving our gross margin percentage has been central to this goal. We achieved a record GP percentage of 33.6% in Q4, and we expect gross margins to remain strong throughout FY23. Some of our key orders received during the quarter included $7 million from Graphics Distribution, our US distribution partner, $4.8 million from Bloom in the US, $1.8 million from Avion Interactive in Finland, $1.5 million from UnitDK in Denmark, $1.4 million from DNH Distributing in the US, and $1.1 million from ESI Informatique in Belgium, to name a few. Despite the small decline in order intake, our actual market share in the US increased from 6% in Q4 last year to 9.3% in Q4 this year, according to data from FutureSource. Our EMEA market share decreased marginally from 7.2% to 6.8% during Q4. Our expectation is that our market share will increase to over 7% in EMEA in FY23 as our new German team get up to speed and start winning significant contracts. In terms of end users, we had some great wins during the quarter. Our front row campus communication platform featuring Easy Room is gaining traction, and we have had some excellent wins, particularly in the Texas region, with several school districts investing heavily in campus safety. We continue to roll out large-scale projects at San Diego School District and growing business in LAUSD. These are part of long-term relationships based on our software platforms, that are widely used by the teachers in each district. We also won a great project at Gulfport School District in Mississippi to roll out our Mimeo solutions with Bloom. In Germany, we won tenders at the city of Arlen, the city of Mulaka, and the district of Duran. In each instance, we beat the competition based on the functionality and operability of our screens and software solutions. In the UK, we won a great project for North Kent College to kit out their multi-campus rollout in Dartford, Gravesend, and Tunbridge. The customer needed a security-rich and flexible solution. Our Android 11 Impact Max screen exceeded their expectations in all aspects. We also continued our national rollout with Babcock Aerospace, providing our UX Pro solutions for their unified communications and training. In summary, Q4 was focused on improving our profitability and margins across both the U.S. and EMEA operations. We expect that to continue throughout FY23. With that, I will now turn the call over to our CFO, Greg Wiggins.