Vislink Technologies, Inc.

Good day and welcome to the VisLink Technologies full year 2022 financial results. After today's presentation, VisLink will answer some of your questions as time permits. You may submit online questions using the window on the webcast. Please note this event is being recorded. Before we begin, I would like to remind everyone of the safe harbor statement referenced in the SEC filings. The Private Security Litigation Reform Act of 1995 provides a safe harbor for certain forward-looking statements, including statements made during the course of today's call. Statements contained herein that are not based upon current or historical facts are forward-looking statements in nature and constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. Such forward-looking statements reflect the company's expectations about its future operating results, performance, and opportunities that involve substantial risk and uncertainties. When used herein, these words anticipate, believe, estimate, upcoming, plan, target, intend, and expect, and similar expressions as they relate to this link technologies and its subsidiaries or its management are intended to identify such forward-looking statements. These forward-looking statements are based on information currently available to the company and are subject to a number of risk, uncertainties, and other factors that could cause the company's actual results performance, prospects, and opportunities to differ materially from those expressed in or implied by these forward-looking statements. For a more detailed discussion of some of the ongoing risk and uncertainties of the company's business, please refer to the company's various filings with the Securities and Exchange Commission. I would now like to turn the conference over to Mr. Mickey Miller, CEO of VizLink. Please go ahead, sir.

Thank you very much. Welcome, everyone. We're very excited to talk about our results for 2022 and about the future of VizLink in 2023. If you go to the, yeah. Our mission remains the same, to enable content owners to deliver and distribute immersive, compelling live content and allow those in uniform to protect and serve. And we'll do this through our vision of digitizing and optimizing video. network in the world. When you look at the areas that we participate, whether it's broadcast, sports entertainment, public safety, these particular pictures all include customers or our product in action, whether it was Tom Brady at the end of a Super Bowl a few years ago, the Wolf Blitzer Studio, or the Miami-Dade Fire and Rescue. These are all areas that our technology impacts on a daily basis, things that happen in our world.

Next slide, please.

We look at 2022 as a year of transformation. We had a large army order in 2021, which represent a large percentage of our business. And that went away. It was deployed in Afghanistan. And once the U.S. was in Afghanistan, the need for that product and technology was no longer necessary. So we had to go through that. We had to go through our public safety by 30%. from 21 and our sports and entertainment business by 40%. The reason why that's important is because that's the area that we've been focused on with our new products that we've developed over the last three years. So whether it's our quantum product or our new transmitter products, Aerolink, these are focused on those markets. So this underscores that our strategy, our technology strategy and our products meet the market, and we're growing quite well in those markets when we anticipate continued growth in those markets. In addition to growth on the top line in those areas, we reduced our break-even point by another $3 million through ongoing cost reduction. We implemented a new go-to-market strategy. We took the opportunity in last year to focus on those products that are non-strategic legacy products, like the satellite line, instead of those products. And now through our new products, we view our hardware products as a gateway to sell software services on campus. And we were now able to deploy that strategy through the combination of Acquisition Point and their Link Matrix products and their bonded cellular products with the traditional VisLink Cofton products. So I think you'll see as we show you our strategy around products, we're leveraging the assets that we acquired through the mobile viewpoint to acquisition to position ourselves better in the marketplace. And through that, we're able to drive a software services strategy on an ongoing basis. We target a 90, 10% hardware to software in this first year, but we expect that to increase in the coming years as we focus on growing our revenue through software and services via our link matrix management platform. One thing we're most excited about is we have the highest weighted sales funnel that we've had post-COVID. It's weighted at $52 million. That includes all the different, you know, if it's a 10% opportunity, then only 10% of the potential revenue is included. If it's 80%, then 80%. So it's a weighted funnel that we feel really comfortable with. focused in those targeted areas of sports entertainment, part of live production, which is probably over 90% of live production, and then public safety, which today is over 90% of our Milgaugh product, or our segment. Next slide, please. When you look at our strategy, it's the same whether we're in the MilGov market or whether we're in the live production segment. Whether it's sports and entertainment or public safety, the guts of our product offering and our software offering are the same. And that comes from everything from content capture, like in the case of IQ Sports Producer, where we have four 4K cameras that we now stitch together to create an automated capture capability to our contribution. We're the only player in our market that can do bonded cellular, can do Cofton, can do private 5G. And now we're doing bonded Cofton and 5G. public 5G, 4G bonded. First one in the industry to do that, and really the only one who has those two technologies with the capability of doing that. And we see that as a massive opportunity as things change over time. And then the applications that run on top of that in a software platform, whether it's camera control, video return, or IFB. Cloud production, we're able to offer whatever the customer wants to use from a cloud production standpoint. We don't have our own app. We allow our customers to use what their preferences are. On the play outside, whether it's transcode or decode of any sort, we're able to do it, and then we can transport that through our IP link or our TerraLink products. But, again, this is all managed through our Link Matrix management platform, which will allow us to both automate and control. So as automation becomes more favorable and more desired in the marketplace, we'll be in a great position with our Link Matrix product line. Next slide, please. So just looking at the public safety market, which is part of the MilGov segment, and as I said, in 22 was the lion's share given our Afghanistan order didn't continue into 2022, but we grew this by 31%. And we expect to double this in this year. We're really excited. There's a couple reasons for that. One is we introduced our Aerolink transmitter last year, and it's got an incredible reception by our customers. It allows our customers to have a 4K from the air to ground, and that brings a lot of capabilities and a lot of visibility. In addition, this is an area where we're offering now our own VMS, where they can go directly to their own PDA and see what's happening from a bird's-eye view. We achieved $2 million in downlink orders around our Aerolink product line in the fourth quarter of last year. We've seen a great reception around Aerolink, and now our quantum receiver is a part of the solution. And we're just beginning to build our international sales pipeline in the Middle East, Asia, and even parts of Western Europe. So we're really excited about the possibilities that we have for this product line. We have the visibility to commit that we can double the revenue in this area in this year. We're continuing to do that through our trade show activity and digital marketing efforts to bring both old customers that used to use our HDX product line and then new customers that are interested in our Aerolink because not only does it do a proprietary Kauffman link, but it also brings bonded 4G, 5G to areas where they don't want to deploy receive stations. So that's a great opportunity for our customers to leverage whatever wireless capabilities are available. On the defense side, We're in the middle of initiatives to identify opportunities to grow in those areas, developing sales channels, partnerships, and joint ventures, while also reviewing quite a few of M&A activity. What we do from a wireless FPGA capability coupled with our encoding capabilities and decoding capabilities is much desired. The world is going wireless, and certainly on the defense side, wired capability is very critical. Next slide, please. So when you look at the public safety market, as I said, when we show what's happening in sports entertainment, these products are effectively the same. But the markets that we play in is AVDS, aerial video downwind systems, which brings from the air, whether it be a rotary helicopter or a fixed wing or a drone to the ground, we're able to take that capability, send it to the cloud and distribute it to people field agents as well as command so that proactive decisions can be made in better control situations. We also take drone backhaul right out of the controllers into the cloud for distribution. Remote surveillance is an opportunity that we've been able to grow in, and that's ability to take videos from whether it be oil sites, or other production facilities and transmit those back to headquarters. And then automated surveillance. This is an opportunity where we're using our IQ sports producer and our automated capability to manage drawbridges such that you don't draw the bridge when someone's on the bridge or or if there's some animal or some type of danger. And so that allows, again, an automated way to support the automated surveillance folks in parts of the world. So the products that we have here, our quantum product that we've talked about many times, we introduced this 18 months ago. It's been well received, probably our most successful product in the history of the company, coupled with our Coftum transmitters. That's our H cam there, our bonded WCS products, which is our bonded 4G, 5G products. And then our new hybrid bonded Coftum. That's our click. It's a very small body worn capability that allows you to take two feeds of video and two feeds of audio. Our IQ SP, which is our IQ sports producer, which is our AI automated camera, and then the Aerolink, which I talked about. But the key piece of this, this is all bound together through our Link Matrix software offering. Next slide, please. On the public safety side, The use case here is pretty simple. What you see on the right is 10,000 pills of fentanyl. Fentanyl kills 300 people a day in the U.S. So there's obviously an intense focus on this. And what we allow public safety organizations across the U.S. to do is it will see what's happening from a bird's eye view. We have our air link transmitter in In the helicopters or fixed wings, we have receivers at the receive station, and we're able to connect all the hardware systems and distribute a low-latency, highly reliable 4K bird's-eye view to the command center or field personnel so they can make proactive decisions. We're also using this for border control, monitoring, of course, of illicit activity, as well as just general surveillance. So this is a key part of the public safety solution to solving the challenges that we have in our society today. Next slide, please. On the live production markets, grew 27% overall with an underlying growth of 40%. That means if you take the legacy products and focus on the new products that we've introduced that are focused largely on sports and entertainment, we've got strong industry tailwinds in the sports and entertainment side. Continuing technology and equipment upgrades, as well as growing demand for cost-effective live event production. Post-COVID, there is an essential demand for high-value live content and more content. And so we continue to work with our partners and with content owners to be able to find creative ways, because it's not only about the event itself, but also the story behind the story as we've been able to see in so many different events that we've seen through sporting teams or brands now taking to Netflix and other venues to be able to show what's happening behind the scenes. And, of course, there's continued interest in REMI, which is remote production capability. Our new products all drive and support those key initiatives, whether it's our quantum receiver, our click OFDM mobile transmitter, or our AI-based technology. As I said, our vision is the ability to bring automation and digitization to all video-centric networks in the world. We'll be showcasing new products at industry conferences. We have our NAB conference coming up. here in April, which is the largest broadcast conference in the US. We recently announced our Sportel partnership with Stream Viral, which is continuing to bring opportunities. Because when you look at IQ Sports Producer, vPilot, Trotter Live, they're all planting seeds of new products to bring new capabilities to customers. We're seeing good traction behind those. Next slide, please. So, again, the products that fit in the live production markets are effectively the same products that were positioned in the public safety markets, just wrapped a little bit differently. But, again, all managed through our Link Matrix software. So kind of the use cases we see are studios. Whenever you see a content owner or a broadcaster create a new studio, They're using wireless 4K, high reliability, low latency equipment like ours. So we've been able to see a good opportunity in traditional studios that are being rebuilt, automated capture, the ability to take multi-camera automated capture and create A live event, just like you have Cameraman on site, we're able to do that through our IQ Sports Producer, and that's been really well received. AVDS, as I mentioned, aerial video downlink systems are used in broadcast quite commonly. We're at the Goodyear Blimp and other places. Remote production, as I mentioned, that's the ability to have fewer people on site. This was accelerated through COVID and have more people back online. at the studio, so you're needing to bring signals back to have production done remotely. That's an area that has had tremendous growth. We continue to see the growth there, and that's where we see our T-Link product being a key product in that area. In-venue is typically done through our proprietary Kostum systems. That's where you'll see the H-CAM and our Quantum receiver being used. And then on location is more mobile. And that's where you use the mobile networks in our bonded 4G, 5G. As I said, when you look forward to planting seeds, the 5G product offering that we introduced and did a lot of testing with BT Sport and others that we announced, we won quite a few awards around that. That's an area that we see developing over time. We're one of the leaders there. That will largely take time because it's a function of regulation of spectrum and also customers moving there. But what we allow them to do is have a platform that allows them to get to that point when they desire. because we have a Koftim solution, we have a bonded solution, and then ultimately a 5G private solution. So we're the only one in our industry that has the capability to do all those three different technologies. Next slide, please. So the typical use case of a Koftim transmitter is our click. which we'll be introducing. We introduced last year at IBC. This year at NAB, we'll have live units, and this will start being shipped in the April-May timeframe. It's a very small OFDM mobile transmitter. It can go on the back of one of these riders on the right. We're able to take in the feed from a camera on the helmet and a feed from the camera on the shoulder. as well as two microphones that you have on the bikes. So it's got incredible capability. And as you know, in the past, MotoGP, as you know, we have four cameras on every one of those bikes, those 20 bikes, now adding two additional cameras. That's the kind of capability, not just with MotoGP or Xtreme E, it's down in the picture down here on the right, But it brings so much capability of immersive content and unique content that you can't achieve other places by having that very intimate look from the individual's body. So we see a tremendous opportunity of growth, not only in motorsports with a click, but in a lot of different areas. And so far, the response that we're seeing from customers about that introduction are very positive. Next slide, please. So, Mike, you want to go through the financials?

Sure. Thanks, Mickey. As Mickey mentioned, 2022 was a transformative year. Revenues were at $28.4 million, and that's down slightly from last year. And that's, as Mickey mentioned, due to loss of some pieces of business of legacy products like the U.S. Army Afghan contract and a few legacy satellite product sales. But we did see strong growth, as Mickey mentioned, in two key segments for us, public safety and sports and entertainment. And there we saw about a 31% growth in public safety and about a 40% growth in sports and entertainment. And Getting increased sales in those areas allows us to start selling more of our higher margin products like Quantum and Aerolink and allows us to start putting more of a service wrapper around our equipment sales. And as Mickey mentioned, you know, we're endeavoring to move to about a 90-10 split in 2023. And we think that's going to increase and that's a conservative amount. So we reduced our break even by three million. And by that, we mean that we reduced our costs and expenses such that, you know, given a certain amount of revenue, we've now taken that amount of revenue necessary to break even down by three million dollars. That gives us some flexibility. And we think, you know, we're going to continue with the cost and expense optimization through 2023. We're not finished. So we've streamlined our product line substantially. We say it's been streamlined by 60%. And that allows us, again, to go up margin, sell higher margin products, newer products, increase and include a greater amount of services. So we think that that obviously gives us a greater opportunity for better profitability. So that the newest product line has gotten extremely good reception and has been evidenced by some interesting awards. We got the IABM award for our 5G for live remote production solution. And we got the broadcast tech tech innovation award for a premium low latency wireless camera technology this year. So our gross margins were 47% of revenue, again, down slightly from last year due to volume issues and some mix, but we expect that to go back up into the mid to lower 50s by next year. We had a strong balance sheet at the end of the year. We had $0.6 million in cash, and we had no debt. Now I'll turn it back over to Mickey.

Thanks, Mike. So as we as we look into 2023, we think we're incredibly well positioned for organic, profitable growth. We've done some changes in the leadership team. Last year, the mobile viewpoint team, Michelle Bice, is leading our product and engineering teams. JD, the head of sales, is leading our sales and Charlotte, our marketing. So we've made a lot of changes and we've just announced a new change. Paul Norridge will be the CFO effective April 1st. Mike Bond has done incredible work since he's been here. He came here with me in the early days of turning this around, get us through the pandemic and get us into the growth position. And we think it now is a great time to make this change as we position this company for growth in the future. so it's the transformation that we started in 2022 we're starting to see yield benefits already in 23. the cost reductions will help continued bottom line improvement and we're continuing on further cost reductions in 23. we'll also increased traction with newer higher margin products that leverage the latest technology of AI cloud and 5G. And then Link Matrix will be integrated to all our hardware platforms. And that's probably 80% along the way and will be completely integrated. But that really is the ability for us to drive the service and software recurring revenues over time. We expect to have a two-thirds live production, one-third public safety revenue mix, which is a favorable mix for us. And we're targeting, as we said, 90-10 hardware software services mix in 2023. As Mike mentioned, we had a strong award-winning product portfolio that was announced last year. That same innovation is increasing. You're going to see a lot of new exciting things happen this year from a product standpoint. As I mentioned, we plan to double our public safety revenues in 2023. The opportunities are there. It's not only our new products, but the activities from the local and state level have increased. That is not only with that funding from local and state, but also Federal funding into the area is increasing spend by many of our customers. So we see a great opportunity to increase that. Drones bring a large opportunity to the table as those get deployed in various areas throughout the country. So we see a growth opportunity there as well. And things like the click, things like our bonded cellular backhaul capability, all position well from a drone standpoint. We still see continued growth in live production. We've got a great list of blue chairs that latency high quality or K wireless systems. And it's not only content owners and broadcasters, but every large enterprise is a media company. They have to communicate with their constituents, with their employees and with their investors and customers. And having the capabilities that we have allows them to do that in a much more efficient and high quality way. So we've had some really good growth around the enterprise as well. And as I mentioned, finally, it all comes down to opportunity. How do we identify those opportunities, bring those qualified leads in, and then close on them? So we have a very strong pipeline of qualified opportunities that the sales teams are bringing in and working to close. So our focus is on increasing that pipeline as well as closing the opportunities down. that are in front of us. And so we're very focused on that. We're very excited about that. We've re-energized the product line. the footprint that we have, the team, and our customer base and our focus around providing innovative solutions to those customers. So we're really excited about 2023. We looked at 2022, you know, a transition year for us where we cleaned up a lot of things, a lot of legacy things. We're able to transition away from, you know, a large U.S. Army order, and now we're positioned with a more diversified customer set but also the opportunity to grow in defense opportunities as we see those, uh, through our initiatives to grow that area as well. Next slide, please. So now we're at the Q and a, so we'd like it to open up, please. Uh, we have a list of, uh, questions, um, on the website. So if you have any questions, please make sure, um, on the website. I think the first one is, um, You know, are you going to do a reverse split? So, as you know, in January, our stockholders authorized us to affect a reverse split so that we can regain compliance with NASDAQ minimum bid price of a dollar per share for 10 trading days. So that's been voted and it's been approved. And we appreciate everyone who took the time to vote for that. We're monitoring our stock price and the various factors to when we think it would be appropriate to implement a reverse split and at what ratio if our stock does not regain compliance on its own. Obviously, we'd love for it to regain compliance on its own. We're in the 15th. If we have not regained compliance by then, we will appeal any delisting notice to a NASDAQ hearings panel, pending which we fully expect our stock will continue to trade on NASDAQ. As part of that hearing process, we expect to commit to a timeline for if we regain compliance. requirement. So those are requirements that we have. As you know, Mike and I have not been big proponents of reverse splits. However, NASDAQ does have a requirement that you be above a dollar. And we've had now two extensions. So as I said, we're going to see how the stock performs. We're very encouraged about the future of our company and the future of our results. And we'll implement a split if it's needed. But as I said, we'll continue to monitor the situation.

I see a number of questions regarding our outreach to our investors and how we intend to communicate in the future. And let's just say that, you know, we endeavor to obviously keep a full line of communication open with our investors and keep you, you know, prized as much as possible about what we are doing within the company. We have recently taken steps to kind of increase our outreach to our investors. We're actually engaging a new investor relations PR firm to help us in that regard. And we do expect to continue to have increased communications with our investors and our constituencies.

Yeah, good point, Mike. As Mike said, we just retained Gateway IR to help us on the IR side. We know we have an opportunity to improve there, and they're going to help us. This is the first earnings call that they've been a part of and have been on for a very short time. So we're very optimistic that we'll be able to increase the communications with our investor community and keep you apprised of how we're developing to the goals that we've set. Another question I see, do you have outstanding quotations with any military, foreign, or domestic that may help replace your former Afghan income? It was a large program with the U.S. Army over one product with one customer. So we don't have any that size with one customer, but we do have with foreign and domestic and public safety here in the U.S., but foreign militaries outside, NATO militaries outside around our ABDS product line. As I said, that's a product line that brings a lot of capabilities around surveillance and control and security. We've got a great reception. And historically, VizLink has been a provider in those areas over years. So we're a known entity in that area, and we're considered a trusted source for that solution. So we're very excited about the opportunity to receive that.

Here's a question from Peter. It asks, what's our cash position? And I think we had mentioned that we ended the year 2022 with $25.6 million of cash. We expect to continue to manage our cash very carefully. We did invest in some increased R&D last year to bring out some of our new products. And we did also invest in our go-to-market model to make sure we're enhancing that so we can reach out to you know, these new and more exciting customers that Mickey mentioned. But we do expect to be somewhat cash neutral throughout the rest of the year, unless we make an investment in an acquisition or something like that.

Okay. We have a question from Brian Kinzinger, the Alliance Global Partners Analyst. Can you quantify total revenue from public safety and sports entertainment in 2022? And adjusting for inventory charge, why was the gross margin abnormally low compared to your recent trends? On the first one, Brian, sports entertainment is the lion's share, 90% plus of live production and public safety in 22 was 90% plus of the MilGov segment, as we report. On the inventory charge, or on the gross margins of 47%, as Mike mentioned, it was largely due to volume and some mix, but largely volume that impacted that down from our traditional, I think we were at 55 or so the prior year.

That's right. And to Brian's point, there was a small amount of the total write-off related to inventory that did go above the line and did go against our gross margin. But as Mickey mentioned, most of it was purely volume-related this year. And we expect next year, as I said, for those margins to go back up to where they normally have been.

Okay. I'll just continue to look at the recent –

Yeah, do you see current developments on AI? Go ahead. Go ahead.

I'm sorry. Byron asked. You probably answered this better than I. What's been our ROI and what's been our experience in the trade shows?

You know, I can just speak for this year. We were at the Expo. We were at security in the U.K.,

Those are very targeted, so it's not like you see a lot of potential customers, but the ones that you see are highly qualified and there for a reason, typically to acquire systems. So our strategy from a trade show is twofold. One, we'll do the two large broadcast trade shows, one being IBC in September and April for NAB. That's in the U.S., And then we're very targeted with the public safety and the sports and entertainment shows that we do during the year. So, for instance, Millipole or Security and Policing or Heli Expo are all big shows where they're not large shows, but the quality of the participants and allow us to walk away with Many qualified leads, whereas at the largest show, you get a lot of names and a lot of people walking through. But the percentage of true potential buyers is a smaller percentage, whereas the smaller shows, it's a much higher percentage because it's a much more qualified, smaller group.

A question from Byron asked, since Q1 is almost complete, can we give guidance? And Byron, we don't give guidance as a rule, but we are, as Mickey mentioned, very encouraged by the uptick in interest for our new products, our new services. We think this is a prelude to what we think 2023 will look like, which we think is going to be very positive. But again, we don't give guidance. We have not given guidance in the past. We're not giving guidance for this quarter.

Okay, so I'm just scrolling to the bottom, so if we have any additional new questions. I think, do you see current developments on AI as an opportunity for the company? You know, I think everybody's heard about JetGPT-4 and the capabilities that can bring certainly that capability, LLM or other AI. like the AI that we're doing in our current products, ultimately video centric networks and all networks will be automated. The first part of that is digitizing. So when you look at the, the journey that we've been on in the video world, SDI was the standard not so long ago. And that was effectively an analog standard digitized, but not IP based. Now everything is moving to IP based. And once you're at an IP based solution, then it's very easy to digitize things and automate things. So that's what we're working on. We're working on IP based Kofta. Obviously our, our, uh, bonded solutions are IP-based, our 5G for live solutions are IP-based, and our AI solutions are IP-based. So as everything converges on internet protocol, we'll be able to automate and digitize. And that's really where the magic of what we bring in terms of the software that's delivered over our hardware solutions brings opportunities for our customers to do so much more, so much more efficiently. So it's either about creating amazing content, but doing it at a lower price point so that efficiencies in the system are there, creating automation to be able to identify what the ideal highlights are. There's so many ways that AI is going to impact our industry, both on the public safety side as well as on the sports entertainment side, live production side, and we're going to be at the forefront of it. I think that's all the questions we have. Again, We will be connecting with our investor base more consistently now with Matt Glover and Tom Colton from Gateway Group leading us on the IR side. If you have any questions, please shoot it to our BISL at gatewayir.com. And we'll... We'll continue to focus on the basics of taking this opportunity of funnel that we have, increasing that funnel as well as converting that funnel to orders and targeting our software services business and our growth engine around public safety and sports entertainment. Thanks, everyone.

Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.