This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk00: Good day, and welcome to the Oblong, Inc. Third Quarter 2021 Earnings Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Brett Moss, Hayden IR. Please go ahead, sir.
spk01: Thank you. I'd like to welcome everybody to today's call. Hosting the call today are Oblong's Chairman and CEO, Peter Holst, and CFO, David Clark. Please be aware that some of the comments made during our call may contain forward-looking statements. Within the meaning of federal securities laws, statements about our beliefs and expectations containing words such as may, could, would, will, should, believe, expect, anticipate, and similar expressions constitute forward-looking statements. These statements involve risks and uncertainties regarding our operations and our future results that could cause actual results to differ materially from management's current expectations. In addition, today's call includes non-GAAP financial measures. Reconciliation of such measures to GAAP measures is contained in the press release issued today. We encourage you to review the safe harbor statement and risk factors contained in the company's earnings release and filings with the SEC, including, without limitation, our most recent annual report on Form 10-K and other periodic reports that identify specific risk factors that also cause actual results or events to differ materially from those described in the foreclosure statement. Copies of the company's most recent reports on Form 10-K and 10-Q may be obtained on the company's website, oblong.com, or SEC website, sec.gov. The company does not undertake to publicly update or revise any forward-looking statements after the call or date of this call. I'd also like to remind everyone that this call will be available for replay through November 24th. A link to the website replay of the call is also provided in the earnings release and is available on the company's website, oblong.com. I'd like to now turn the call over to CEO of Oblong, Peter Hulse. Peter, the floor is yours.
spk03: Thanks, Brett, and thanks to everyone for joining the call today. Before I get started... I'd like to make sure we pay tribute to our veterans who have defended our country and have been incredibly heroic. I'd like to say thank you for defending our way of life and our freedoms that we enjoy today, first and foremost. Today, we're going to talk a little bit about some of our accomplishments over the course of the third quarter. We're actually going to reverse engineer this a little bit, and we're going to start with the financial statements first, and then I'll take everyone on the call through progress update for the company and some of our accomplishments throughout the quarter, as well as some of the things we're really looking forward to here over the coming months ahead. So I'll quickly turn this over to David and have him take you through the financial statements and report for the quarter.
spk02: Thank you, Pete. Good afternoon, everyone. Our revenue for the third quarter of 2021 was $1.8 million. compared to $3.3 million for the third quarter of last year. This decrease in revenue from last year is mainly due to the effects of the ongoing global pandemic on our channel partners and customers as they evaluate how and when to reopen their commercial office space. Revenue for the third quarter was relatively consistent with the first two quarters of as revenue for each of the three quarters this year is within the range of $1.8 million to $2 million. Net loss for the third quarter of 2021 was $662,000, compared to a net loss of $2.1 million for the third quarter of last year. During the quarter, we recognized a gain on debt extinguishment of $2.4 million in other income. This resulted from full forgiveness of our PPP loan during the third quarter. Our adjusted EBITDA loss was $1.7 million in the third quarter of 2021 compared to an adjusted EBITDA loss of $1 million for the same period last year. This increase in adjusted EBITDA loss was primarily due to lower revenue and gross profit partially offset by reduced operating expenses. Turning to our balance sheet, we are pleased to have strengthened our balance sheet during the last 12 months. At the end of the third quarter of 2021, we had total cash of $10.8 million. And since our PPP loan was fully forgiven during the third quarter, we now have no remaining debt on our balance sheet. With that, I will now turn the call back over to Pete.
spk04: Thanks, Dave.
spk03: Today we're going to talk about the ongoing kind of challenges in the industry, but more importantly, the incredible opportunities in front of us. It's pretty obvious that how we now work and how we plan on working has, in fact, indelibly changed. There will be new technologies to support new ways of work. There will be new spaces, new redesign, and new inspirations for employee engagement in the future that will be ultimately integral to success in the new model of working. We believe there are four key trends now related to digital transformation, particularly when it comes around the collaboration space. One of the first trends is how are businesses and organizations being digitally transformed and when many businesses were not built to be digital in the first place? How are businesses equipped with the tools and infrastructure to innovate under these very diverse circumstances? How can businesses collaborate and connect to the degree which collaboration and connection are accelerated digitally? And lastly, how will digitization, collaboration and connection and infrastructure be securely protected in a growing space? Many of you have heard the word hybrid work over the last 9 to 12 months as many people have gone home and have not yet returned to the office. There's been a significant amount of research recently to suggest that while a work from office resurgence hasn't yet happened, A new model will slowly be forthcoming as 2022 evolves. Successful hybrid workplaces will ultimately be very elastic. Over the next five years, these spaces and amenities that we've long since known will be optimized in a way that employees will want to come in and optimize their office experience. One day, perhaps it's 35% of the staff and the next 90%. It may depend on a specific event or a specific meeting that one may have to attend. In any scenario, companies will want to use technology that entices users in office while also engaging remote participants to the maximum capacity possible. So, there's new expectations for the remote office, and as hybrid workplace becomes the norm, the metrics and the technologies needed to maximize and, more importantly, engage the workforce are incredibly critical to ensuring productivity. Distributed workforces that require digitization and automation tools that support them. And remote work will intensify that need for human connection. You'll be part of creating engaging spaces and improving the employee experience when workers are in the office. But more importantly, when you're remote, you'll want that same level of engagement. And many technologies are now being developed and designed around optimizing that level of remote engagement. As we look at the shift to the hybrid workspace in the future, it suggests that there may be anywhere from two to three times more of the market opportunity for ideation and collaboration spaces over the next five years. If you see the graphic on the left, as hybrid workspaces take root, the purpose of the office will have to evolve. So historically, 60 to 70% of office space has been individual and support spaces, and the other 30 to 40 have been collaborative and social spaces. What we now see through some of our partners in the real estate market is many corporate real estate planners, facilities planners, information technology planners are contemplating substantial redesigns of their corporate footprints over the next one, three, and five years. That'll ultimately result in what we believe is two to three times more ideation or collaboration, more importantly, more engaging spaces than what we've seen before in the past. I'm going to talk a little bit about a subject that has been much popularized in the media lately, and that's the metaverse, and really how Oblong creates an interesting bridge to the next generation of computing. So, as many of you heard, the metaverse has been bantered about significantly, particularly through the likes of Facebook, now called Meta, and the likes of Microsoft. One has a very distinct consumer view of the world. and the other, a far more traditional corporate view of the world. And for those of you that don't know, a metaverse essentially is a digital realm that connects us in a significantly different manner than the physical world. In theory, it allows you to conduct commerce, engage with your coworkers, your friends, in a much, much different way through augmented reality or virtual reality by using specific purpose-built devices that connect you to those corporate environments content repositories. What we think of the metaverse is in many ways it's been around for a very long time. There's been some fantastic companies out there that have been designing eyewear, looking at content around designing second and third party worlds for probably the better part of 15 years. An interesting comment we've had from one of our customers lately is, you know, our technology has and is completely disruptive, right, to the paradigm we've been living with for the last 20 years. And so, in many ways, we think Oblong's last 20 years of intellectual property and gathering of information from customers is really all built up for this moment in time. As some of you know, long before the metaverse actually existed, Oblong was actually building experience using spatial and gestural interaction with information. Many of them have been commercialized and populated in the Hollywood realm. But quite frankly, over the last 15 years in particular, the company has built up a substantial amount of intellectual property around the notion of connecting with data in a way that uses your hands or uses motion to extend yourself beyond your physical world into the digital world. So how do we see that transformation occurring? In many ways, mezzanine, our current product that we offer today, is really the logical progression between conventional collaboration and what the metaverse promises in about five to ten years. Technology is typically slow to evolve, and while there's a significant amount of opportunity in that space that we believe is incredibly fascinating, we believe a shared workspace, both physical and virtual, also known as hybrid, that allows collaborators to contribute, to manipulate and to fluidly arrange multiple streams of content in parallel and simultaneously within, across, and between office and remote collaboration spaces is, in fact, what Oblong does best. So, ultimately, we believe that this hybrid universe, this mini metaverse, if you will, that exists today is really predicated on connecting data and information both in rooms and on a remote basis. And Oblong has long been procured by visionaries and people that are early adopters, people that are looking for high levels of presentation, high levels of engagement. And in many ways, that was sort of the precursor to what the metaverse promises in the future. As most of you know, we have a high degree of expertise in connecting rooms today. And, you know, full disclosure, obviously, the rooms have been quite quiet, unfortunately, through the pandemic. We do see a small resurgence starting to happen in various rooms in different cities across the United States right now, and certainly a few in Europe. But our room-to-room expertise is really, you know, it's without equals right now. Because of the way we have gestural and spatial kind of connectivity in rooms, because of the way we can create presentations and ideate through digital canvases, it's a very unique proposition that most companies simply haven't deployed yet. Our current product mix today, we offer three different products, as most everybody knows. We have products that are really based on your digital footprint in your conference rooms. We have, depending on screen sizes and screen types and configurations, we really have a mezzanine room for anybody out there, right, that's looking to really enhance engagement as users come back to the office. In many ways, Oblong represents that conceptual tool, that ideation tool, that visionary tool that If people were to come back to the office, they would have sort of a purpose, right, to come back to the office. You would see something like this and you would immediately start engaging with it versus the old sort of way of doing things, which is plug things in, get one share, one piece of content at a time on the screen. Whereas in our case, everyone shares. Everyone uses the Canvas to its maximum potential. So, as I said earlier, we believe the future of work is in fact connected, very connected, and ultimately very hybrid, right? We need to synchronize interaction. We need to have multi-screen display workspaces. And we need to have concurrent multi-user interaction, right, that encourages participation. There's no waiting to share your screen or contribute to the conversation. You want creativity to flow. And in order to do that, you've got to create spaces and environments that allow data connected to the human to seamlessly interact and engage with everyone simultaneously. That's ultimately what we might label as contextual collaboration or cognitive collaboration, but ultimately you get to decisions much, much quicker when you have more information presented in front of you. Our next path going forward is really room to remote, and it's our future product. It's designed to offer remote users a very similar experience to those in conference rooms. And when you look at how the hybrid workforce is about to evolve and really where it's headed, you can see a path where 70, 80% of employees today will in some capacity be remote in the future. Another great trend that's happened in the last 12 months is as people have gone into their homes, they have upgraded their technology stack significantly. So many folks who have long lived on laptops or tablets with very, very small footprints in real estate have now gone to 33, 36, 50-inch screens in their offices now. because they too want to have that sort of multi-stream, multi-conference experience. So our next-gen offering is currently in alpha, completely available right now and offered at multishare.us as a cloud-based multi-stream collaboration service. Its purpose is to deliver an elegant and equally engaging experience to collaborators both in the physical and digital worlds. Very, very similar as a precursor to what the metaverse promises in a full digital world, We believe we're a bridge, effectively, right, between those two worlds. Here's just a caption of what you might see if you go to our website here at this point. You'll see this notion that there'll be multiple collaborators. People will have different visual interpretations of what they can see. People can share multiple screens simultaneously. You can see more. You can do more. Wanted to share some customer use cases today with our investors. Just to give you a sense of really why, right, why the purpose of mezzanine exists today. So, this is a quote from a gentleman at Holder Construction, a large construction company. I won't read the entire quote, but the note of it, the concept of it is the ability to use mezzanine and bring everyone together in one place really turned, you know, a five-week effort into a five-hour effort. And it really, it came down to their ability to have incredible amounts of data cast across multiple screens simultaneously. We've deployed a great solution for JLL in Europe primarily. They've deployed a concept called Next, the Next Room, Next Technologies, where they've essentially created digital twins. And if you see an office like this, and I've actually been in this space where you would bring in potential customers and you would, Oblong's technology is used effectively to move from screen A to B to C to D across the entire space. And it's dynamic, right? You actually can put the device in the customer's hands. They can start to engage with the information and they get a really feel for how the technology works. JLL has done an incredible job of reducing transaction time by, as opposed to doing full walkthroughs of their commercial spaces, They do three-dimensional flyovers and they do three-dimensional walkthroughs of these potential spaces. And so clients can see 15 or 20 spaces in an hour window versus having to see them over multiple days. Accenture has long been a customer of ours and they really think about decision-making at Accenture, right? How do we populate data and information in a way that we can get maximum throughput, maximum productivity? They really are about deep client engagement, and so they use this as an incredibly dynamic presentation tool. IBM Security, they also use our technology today embedded in everything they do in their X-Force command center, so you can get a representation of it here. The FAA today uses our tool, again, in their operations center. You can see how offices are set up there and sort of, you know, you have a conference room on the left and you have workstations behind you, but everyone is seeing the same thing. in the same time, right? The level of engagement is ultimately optimized. I'll talk quickly about just customers and partners. Mezzanine is deployed across a number of diverse verticals today and across recognizable global brands. Here's a small representation. And the point really here is, absent the pandemic, Oblong has an incredibly wonderful and diverse customer base, many of whom we have kept in touch with. many of whom are looking to expand their footprint as they arise and come out of the pandemic. And this is just a great representation of some of the brands we have done business with and really continue to do business with today. In order to get to some of those customers, historically, we've used a number of channel partners for distribution. And while we've often talked about Cisco as a significant partner for distribution, many of these folks on this list today are key partners across the United States and Europe and EMEA. who we have crafted long-term and deep relationships with, who also are keenly interested in looking at 22 and beyond and seeing what the future brings. So we've made a substantial effort to reach out to many of these folks in the last three to six months as we see the light at the end of this period. And many of them are very, very interested in trying to bring new solutions and new technologies to the forefront because, frankly, customers are demanding something new. They're demanding something more engaging. And Oblong is really at the forefront of engagement. And lastly, I'll just close with what I believe are some near-term objectives that I'd like to share with the audience. So by year end, we are looking to expand our engineering and marketing efforts in anticipation of a really broader market reopening throughout 22. We intend on delivering a beta of our cloud service by year end. Today, we have an alpha, and it's readily usable and available. where we intend to create integration prototypes with leading collaboration cloud services. So you could look at this conceptually as the network effect. We intend to integrate through APIs into other people's collaboration services to some degree, right? What we offer today is this incredible sort of hybrid experience between the room user and the remote user and our path forward really in order to create a tremendous market opportunity will be both direct and indirect from a go-to-market perspective, and we will use partners and partner with some of the larger collaboration cloud services that are out there today. And lastly, we're going to, and we have been already, actively pursuing inorganic growth opportunities through M&A that address the four key themes mentioned earlier. Many of the themes revolve around productivity and engagement, and There's no shortage of companies out there who are doing wonderful things in machine learning and artificial intelligence. And I think you'll see Oblong pursue many of those themes aggressively here over the next four to six months and use advisors as needed. For the first half of 22, we will complete and deliver our next generation cloud service into the market. Assuming a gradual market reopening does in fact occur, We will expand our marketing and sales efforts that we've been doing throughout the course of Q3 and Q4 to deploy Mezzanine into existing and prospective and a growing list of potential customers. And lastly, we'll really expand our integration partner opportunities, right, beyond the traditional collaboration networks. And so while our product has historically been centered in pure native collaboration spaces, we believe there's a much, much, much larger ecosystem out there to allow for people to engage with content from within their existing platforms. So if you think of Salesforce.com or Dropbox or companies like that that have their own clouds and carry a tremendous amount of content, you might be able to escalate to a multi-share session or escalate into a mezzanine session, right, in a room as it becomes available. And so a tremendous amount of work next year will go into doing a lot of integration into other people's clouds. as we evolve the product. So with that, I'd like to hand the call back to the operator and look for potential questions.
spk00: Thank you. If you would like to signal with questions, please press star 1 on your touchtone telephone. If you're joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, star 1 if you would like to signal with questions. We'll pause for just a moment. As a reminder, if you would like to signal with questions, please press star 1. Again, that is star 1 if you would like to signal with questions.
spk04: We'll pause for a moment. And at this time, there are no questions. I'll turn the conference back over to you.
spk03: Thanks so much, Justin. Again, we appreciate everyone taking time to attend today. We believe there are some fantastic opportunities as things like the metaverse evolve. I do think Oblong is really an opportunity and a bridge for users to vault themselves into what technology will be in the next five or ten years and really appreciate everyone's time and attendance today. Thank you very much.
spk00: Thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day.
Disclaimer