Boxlight Corporation

Thank you and welcome to the BoxLight first quarter 2023 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 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 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 the call today. After my remarks, you will also hear from Mark Starkey, our President, and Greg Wiggins, our Chief Financial Officer. Mark and I are joining from our London showroom, and Greg from our corporate headquarters in Atlanta. I'd like to start by thanking all of our supporters across the globe, including our employees, business partners, customers, and shareholders. Our current and future success is entirely dependent on your support. In particular, I'd like to recognize our loyal and dedicated employees. We have the most talented team in the industry, including our executive team members, Mark Starkey and Greg Wiggins, who will share their thoughts today, as well as Hank Nance, our Chief Operating Officer, and Sean Marklew, our Chief Technology Officer. Hank and Sean bring decades of industry-specific experience, have been instrumental in developing and maintaining our best-in-class product suite and support organization. Over the last few months, we've attracted several new team members, including Karen Adams, Vice President of Professional Services, joining us after 16 years at Promethean, Clint Knudson, Vice President of Sales covering the Western US, an industry veteran of 15 years, including 11 years at our largest channel partner, Bloom, Julia Moore, Sales Director covering Germany and Austria, also previously at Promethean, and Mark Tildesley, Enterprise Sales Director for the EMEA region, bringing over 20 years experience, including 14 years at Maverick Tech Data. Our employee retention has consistently exceeded 90%, well above the industry average, and we are attracting industry talent, often from our largest competitors. A key reason for our success in hiring and retaining top talent is our strong company culture built on core values of trust, leadership, teamwork, and purpose. For the first quarter, I'm pleased to report we delivered $41.2 million in revenue, and 3.3 million in adjusted EBITDA, exceeding our guidance. Due to softer demand across the industry and changes in foreign exchange rates, our revenues declined by 19% over Q1 2022. However, our gross profit improved by 20% and adjusted EBITDA by 171%. Driving our improved profitability was our strong gross profit margin of 37%, an increase of 1,190 basis points over Q1 2022, and our best result to date. For the trailing 12 months, we have delivered $212 million in revenue, 32% gross profit margin, and $22 million in adjusted EBITDA. In addition to our company-wide focus on improving margins, we have also taken a conscious approach to reduce operating expenses where appropriate. For Q1 2023, we reported $15.3 million in operating expenses, a reduction of $700,000 compared to Q1 2022. We will continue to consider ways to optimize our organization for both continued growth and maximum profitability. As of March 31st, we maintained a strong balance sheet, including $11 million in cash, $45 million in inventory, and $62 million in working capital. Our debt balance was $49 million, a reduction of $9 million from March 31st, 2022. We continue to expect modest single-digit revenue growth for the full year 2023, with a bulk of that growth coming during the second half of the year. For Q2 2023, we are guiding to $50 million in revenue and $4 million in adjusted EBITDA. Our confidence in delivering full-year revenue growth is based on our global sales pipeline and an increase in significant tenders in key global markets. Additionally, there are still substantial government funds allocated for the purchase of education technology solutions, particularly in the US and certain European markets. In the United States, billions of dollars of ESSER funding are still set to expire, if not obligated, by September 2023 and 2024. Over the next few quarters, school districts will be making significant purchasing decisions to utilize the allocated funds. We recently filed our annual proxy statement and provided notice of our annual meeting on Tuesday, May 23rd at 11 a.m. Eastern. We invite all shareholders to cast their proxy votes prior to the meeting. We've requested your support for several proposals, including the reelection of our seven board members, the ratification of our audit firm, approval on an advisory basis of our executive compensation, an amendment to our equity incentive plan increasing the number of shares available for issuance, and authorization for our board of directors to effect a reverse stock split if deemed in the best interest of our shareholders at any time prior to July 2, 2023. Market valuations have been challenging over the last year, particularly for microcap technology stocks driven by broader economic concerns. As a result, despite our positive financial performance, our stock prices declined to under the minimum $1 stock price requirement by NASDAQ. In the event our stock price does not organically increase to the required level, we will need to consider a reverse stock split to maintain our NASDAQ listing. In future quarters, we plan to utilize the $15 million share repurchase program we announced earlier this year, repurchasing our stock during times we have excess cash flows from operations and are trading below our intrinsic value. We maintain a long-term focus and are confident that as we demonstrate continued improvement in our financial fundamentals, in time, the market will reward us with an appropriate enterprise value. We have a significant competitive advantage as a U.S. company that is committed to data privacy and security. Our software solutions that store sensitive student and user data are developed and hosted in the US, UK, and Western Europe, and that user data is not accessible by unauthorized parties, including foreign corporations or governments. We are unique in that statement as our key competitors are foreign owned and controlled. We continue to offer the most comprehensive integrated solution suite in the industry and are consistently enhancing our existing solutions and introducing new products to market. Last quarter, we launched a number of new products, including our LED video walls, non-interactive screens for the U.S. market, and CleverHub Meeting Room collaboration solution. We have started to gain traction with our new products and have begun shipping to customers. This quarter, we are launching our new generation interactive displays from Mimeo and Clevertouch and will be the first in the industry to include a full Google Enterprise Devices Licensing Agreement certification, or EDLA certification. This is a significant advancement in the interactive touch for an industry, and we look forward to developing our solutions further with Google. Our EOS Education professional development team is also certified with Google, having an education services partner specialization in Google Cloud Partner Advantage. With the partner specialization, our EOS Education team has the capability and capacity in building customer solutions in the education services field using Google Cloud technology. Our dedicated training specialists provide customized professional development, supporting educators using Google platforms in classrooms and schools efficiently and with confidence. In January, 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. Our front row attention solution also won the EdTech Cool Tool Award, and our CleverTouch brand won three Best in Show awards at ISE for Impact Max, UX Pro 2, and Lynx Whiteboard. We are demonstrating thought leadership, significant product innovation, and meaningful financial growth. By staying the course, to realize our mission to be the industry leader, we will in turn deliver durable, long-term value to our shareholders. With that, I will now turn the time over to our president, Mark Starkey.

Thank you, Michael, and good evening from London, where we are holding our EMEA partner event this week. Apologies. We've had a fantastic day here, showcasing our latest products and solutions that we will be launching this summer including our latest Google-accredited solutions for the classroom. As the world returns to some form of normality post-pandemic, we are seeing a return to the more usual edtech buying patterns in both the US and EMEA, with Q2 and Q3 being the busiest buying seasons and with Q4 and Q1 being much quieter. As a result, we are seeing slower order intake and revenues in Q1, albeit with stronger profitability. Order intake in Q1 was $41.5 million, down 35% year-on-year, and with 50% being derived from the US, 47% from EMEA, and 3% from Asia-Pac. Interestingly, despite order intake being down, we continue to grow our market share, with our US market share increasing from 5.3% to 7% year-on-year during Q1, and our EMEA market share increasing from 5.6% to 6.2% year-on-year, according to FutureSource. Some of our key orders in the US included $4.4 million from GDI, a US distribution partner, $2.2 million from Bloom, $1.6 million from Data Projections in Texas, and $1.3 million from Advanced Classroom Technologies. Overseas, we have some excellent orders, including $1.4 million from Bischoff AG, our partner in Switzerland, $1 million from IDNS in the UK, and some significant orders from Niavac based in Northern Ireland, to name a few. In Germany, we have invested in our sales team, and we now have eight sales heads, a marketing head, and a country manager. There is a lot of focus in Germany to gain traction in the corporate market where the margins are much higher. As a result, I am pleased to report our Q1 margin increased by 26% year-on-year in Germany. We recently also invested in our first showroom in Germany, based in Dusseldorf, with an expectation to open in the next few months. We also won some significant tenders in Germany during Q1, including a 900-screen order from Hammann district for 86-inch Impact Plus screens and an 800-screen order for 86-inch Impact Max screens in Dusseldorf. We have 15 other tenders currently in the bidding process, and we hope to report next quarter on the continued success and expansion in Germany. Finally, I want to mention a few words about our development in Africa. Africa may not be our biggest market, but we are passionate about building the best education solutions possible and supporting emerging markets. We have a fantastic dedicated partner in Africa, IABS, who share our passion for innovation and solutions and have grown our business to be the number one interactive screen for education in Africa. During Q1, they won two large projects in the education sector and also opened a second experience center in South Africa. They are expanding rapidly across territories in Africa and recently trained over 200 educators in Namibia and hosted their first partner event in Botswana. In summary, Q1 order intake and revenues were down but our profitability continues to improve. Our expectation is that we will return to revenue growth in the second half of the year as there remain significant funds available for education establishments to invest in technology. With that, I will now turn the call over to our CFO, Greg Wiggins.