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spk00: Okay, good morning. Good morning, everyone. Welcome to VizLink's fourth quarter and full year 2023 earnings conference call. My name is Alison, and I will be your operator for today's call. All participants are in listen-only mode. If you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your touch-tone phone. To withdraw your question, please press star and then two. Joining us for today's presentation are the company's CEO, Mickey Miller, and CFO, Mike Bond, who will report results for the fourth quarter and full year ending December 31, 2023. A copy of the press release is available on the company's website. Before we begin the call, we'd like to provide this link safe harbor statement, which includes cautions regarding forward-looking statements made during this call. Management will make statements during the call that include forward-looking statements within the meaning of the federal securities laws which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including without limitation or examination of operating trends and financial expectations, are based upon the company's current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not rely on these statements. For a list of risks and uncertainties associated with a company's business, please see the company's filings with the Securities and Exchange Commission. This link disclaims any intention or obligation except as required by law to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information that is accurate only as of the live broadcast this morning, April 1st, 2024. Please note, today's event is being recorded. Now, I would like to turn the call over to VizLink CEO, Mr. Mickey Miller. Sir, please proceed.
spk03: Thank you, Alison, and thank you, everyone, for joining us today. This morning, we will provide our financial results for the fourth quarter and full year ended December 31st, 2023, along with highlighted business accomplishments. As a brief overview for today's call, I'll start by highlighting our 2023 performance, outline our strategic direction, and detailing our three-year financial goals. Then I'll pass the call to Mike to discuss our financial results. I'll then come back to discuss recent updates within our key target markets, product development, and updates around our go-to-market strategies. With that, let me begin by saying how encouraged we are about our progress and how excited we are about the future of VizLink. 2023 marked a pivotal year for VizLink. As we position ourselves for accelerated revenue growth and enhanced cash flow performance in 24 and beyond, our vision to leverage our proprietary hardware infrastructure to drive new recurring software and service sales is gaining traction. Our software and service revenue climbed north of 10%, of total revenue in 2023, exceeding the 90-10 software and services hardware ratio we targeted at the beginning of last year. The recent announcement of our Air-to-Anywhere platform will be an accelerant to the software service sales. We made significant strides in advancing our presence in the global public safety markets, driven primarily by our airborne video downlink systems, or AVES, solutions. Our efforts led to securing new customer wins across local, state, and U.S. federal agencies and large governments worldwide. To punctuate the progress we've made, we've recorded an impressive 75% year-over-year increase in middle-gov revenue in 2023. Our efforts were bolstered by our strategic acquisition of BMS assets in September, which solidified VizLink's leadership in AVDS, particularly in U.S. federal, global OEMs, in the EMEA region. The BMS customer base significantly broadens our market reach and growth potential in the years ahead. It allows us to drive returns on our extensive new product introduction beyond the traditional visiting customer base. The acquisition has quickly demonstrated its value evidenced by $1 million plus order we received recently in EMEA. Our growth narrative extends beyond AVDS as we gained revenue traction in the video data transport market headed into 2024, as noted by a million dollar order for border surveillance project in Asia. Connected cameras from all types of venues and vehicles is a growing market where our bonded cellular technology plays a key role. In addition to the video data transport market sector, we are seeing growth in the drone command and control or drone C2 area. Through the BMS acquisition, We have secured one OEM market leader and are targeting others. While this is a nation market for us, we expect it to grow 75% this year to just under 2 million in revenue. As we reshaped our revenue profile, VizLink has undergone a significant transformation streamlining our product and operations over the past two plus years. By optimizing our product lineup, we're able to consolidate manufacturing, including moving most of our UK operations to the U.S. and third-party contract manufacturers. While eliminating non-core products impacted our revenue growth, it has enhanced efficiency and profitability, laying the groundwork for our new three-year strategic plan for profitable growth. With the strategic execution throughout 23 and into 2024, we believe we are on track to achieve positive cash flow, and we are targeting cash flow positivity in 2025. Our accelerated middle-gov sales, combined with increasing software and service sales and operating leverage, are expected to drive significant growth. As we enter the second quarter of 2024, VizLink stands stronger than ever. Our weighted sales pipeline is robust at 48 million, and our backlog is at the highest since the pandemic, highlighting the growth opportunities that lie ahead. Furthermore, our improved book-to-ship ratio and significantly enhanced out-of-box success rates shows the effectiveness of our operational enhancements, enabling us to deliver higher quality products at an accelerated pace. We are in full swing to start the year, making substantial progress toward our goals behind our leading technology. We believe we are positioned to gain further market share in our key markets this year and drive meaningful top and bottom line financial improvements. Before I go any further, I'd like to pass the call to our CFO, Mike Bond, to discuss our fourth quarter and full year 2023 results. Mike?
spk02: Thank you, Mickey, and good morning, everyone. Looking at our financial results for the fourth quarter and full year, our total revenue for the fourth quarter of 2023 was $8.1 million, an increase from $7.4 million in Q4 2022. This improved revenue performance primarily stemmed from the growth of our solutions in MilGov markets, aided by strategic acquisition of the BMS assets, and the increased adoption of service level agreements. For the full year, our total revenue was $27.5 million, compared to $28.1 million in 2022. The change was primarily due to product rationalization efforts and the discontinuation of lower margin subscale product lines. Gross profit for the fourth quarter of 2023 was 3.7 million, with our gross profit margin for the quarter at 46%. This was compared to a gross profit of 2.4 million and a 33% gross profit margin in the fourth quarter of 2022. Gross margin improvement was due for the greater contribution of MilGov and software and services to the total revenue, partially offset by some one-time manufacturing charges related to new product introduction. For the full year, gross profit was $14.1 million, compared to $12.9 million in the prior year. Our gross profit margin for 2023 was 51%, a strong improvement from 46% in 2022. Total expenses in the fourth quarter of 2023 were 10.6 million, a 21% decrease from 12.9 million for the same period in 2022. For the full year, our total expenses were 38.1 million, an 11% decrease from 42.2 million in 2022. Turning to our profitability measures, we recorded an operating loss of $2.6 million in the fourth quarter and improvement from $5.6 million loss in the prior year. For the full year 2023, our operating loss was $10.6 million compared to $14.1 million loss in the prior period. These improvements reflect a strategic cost management effort and the increase in high-margin software services and milgov revenue. Net loss attributable to common shareholders in the fourth quarter of 2023 was $2.4 million, a $0.99 per share, an improvement compared to $5.5 million, or $2.36 per share, in the prior year period. For the full year, Net loss attributable to common shareholders was negative 9.1 million or $3.83 per share, a 25% improvement compared to 13.5 million or $5.81 per share in the prior year. EBITDA for the full year 2023 was a loss of 9 million compared to a loss of 12 million in the prior year period. Adjusted EBITDA, a non-GAAP metric for the year, was a loss of $6.4 million compared to a loss of $7.8 million in 2022. A reconciliation of EBITDA to GAAP measures is contained in our earnings release issued earlier today. On slide six, moving to the balance sheet, As of December 31st, 2023, we had a cash and short-term investments of 14.2 million compared to 18.2 million at the end of the third quarter. Improving cash performance remains a top priority for us in 2024. We maintain a strong working capital base with 31.8 million in working capital at the end of the fourth quarter compared to 33.4 million at the end of Q3. We expect to see improvements in our working capital terms in the coming quarters. Our strong debt-free balance sheet gives us the flexibility to actively seek strategic acquisitions and partnerships to enhance our capabilities and channels, especially within the defense and public safety markets. In summary, our efforts over the past two plus years restructure our cost base, redesign our product line, integrate two key acquisitions, and rejuvenate our sales channels have begun to bear fruit in 2023, marking a significant improvement in our profitability. Our progress in 2023 is largely attributed to strategic cost management, operations optimization, and an increased contribution from high margin sectors such as software, services, and MilGov revenue. As we progress in 2024, these initiatives are expected to further solidify our position and give us a trajectory towards greater growth. That concludes my prepared remarks for 2023. I'll now turn it back to Mickey.
spk03: Thanks, Mike. I'd now like to provide more operational updates, starting with our achievements in MilGov. Building on our solid foundation, BMS has bolstered our position after only a little over three months. As I mentioned, our revenue from MilGov markets witnessed an impressive 75% year-over-year growth, largely attributable to the success of our AVDS solution. We achieved over $2 million in AVDS orders from North America's public safety sector and secured another million dollars AVDS order with a leading Air Force in EMEA. The integration of BMS has been seamless and fruitful, setting us up for sustained momentum. We're targeting an ambitious 50% compounded annual growth fueled by continued execution of our strategic initiatives and ongoing industry trends, such as increased public safety and defense spending with the current global geopolitical backdrop. Additionally, the recent appointment of Bill Sweeney as our new managing director of MilGov business brings valuable industry expertise to our leadership team, enhancing our ability to foster strong client relationships and integrate our services offering. We have taken significant steps forward with the launch of Air to Anywhere with our ABDS platform. This innovation is a key part of our strategic roadmap, incorporating initiatives to provide AI enhanced analytics to our customers. In the live production markets, we continue to see steady growth and significant contributions to our revenue stream. Our products have played a pivotal role in delivering coverage of major cultural and sporting events globally, reaffirming our position as a trusted provider in this dynamic market. Notably, our recent partnership with Vocal VR, Aspire, and the A2RL series is set to redefine the future of racing by providing innovative VR over RF wireless solutions for autonomous race cars. The groundbreaking technology will allow users to experience a real-time VR view from the cockpit directly to headsets on site and ultimately at home. A2RL is well-funded in Abu Dhabi and is targeting international expansion, hosting large rave events, and forging new partnerships to elevate the overall race experience. The initiative enhances the spectator's experience and aims to revolutionize how we engage with the sport of racing itself. Financially, the outlook for this partnership is promising. The initial deal in 2023 was $1.8 million, and there are plans for upgrades in forthcoming years. The venture is just beginning, and it represents a significant step forward. Additionally, we partnered with Zoom Communication India's premier outside broadcast service provider for ultra-low latency 4K wireless camera systems. This collaboration is particularly significant as it introduces the first ultra-low latency systems to be deployed in India, setting a new standard for live broadcast in the growing region. This partnership expands our global footprint and underscores our delivery of industry-leading technology. Moving to our product updates, technology innovation has been a key element to our customer and market success. In 2024, 70% of our sales are expected to come from products introduced in the last two years. In 2026, we expect they will account for close to 100%. Our AVDF solutions remain at the forefront of innovation, empowering our customers with cutting edge technology to seamlessly capture and manage high resolution ultra-low latency live video and associated data. We're excited about the significant advancement in our device management ecosystem, particularly in our enhanced Link Matrix platform, the bedrock of our software and services offering. With Link Matrix, we've integrated cloud capabilities to improve remote workflows and collaboration, which is invaluable for live broadcast and efficient field operations, particularly in public safety scenarios. Looking ahead, we have identified key initiatives to further elevate our solutions. We see strong potential in leveraging AI for video processing, enabling us to detect illegal or abnormal activities based on air and static cameras, such as crowd control, drug trafficking, and border control. Additionally, we aim to utilize AI to create automatic summaries of video content for surveillance, reporting use cases, enhancing operational efficiency and decision-making capabilities for our customers. Furthermore, we are committed to ensuring secure cloud distribution and storage of our footage delivered via our AVS services, providing peace of mind and reliability to our customers. We're also focusing on remote management capabilities, allowing for the seamless management of all solutions, elements, and delivering eSIM provisioning eServices. These and our other advancements are all based on our design strategy and methodology that we implemented over the last three years to leverage the same circuit architecture and component base to drive product commonality and simplicity, which results in lower cost, higher quality, and scalability. We will continue to push the boundaries of technology to deliver exceptional value to our customers and drive the industry forward. As we continue to refine our strategic roadmap, I'd like to highlight the strong growth potential across the four focus areas that form the cornerstone of our go-to-market strategy. These areas are live video connectivity, airborne video downlink systems, video data transport, and drone control and communications, or drone C2. The beauty of going to market in these four focus areas is that we can leverage and repurpose our existing product lines to meet a variety of needs and applications. This approach allows us to achieve scale and capitalize on opportunities in these growing areas with agility and precision. Our public safety go-to-market strategy continues to evolve and expand. While maintaining strong partnerships with major aviation units, we are actively cultivating our relationships with large OEMs, and the BMS acquisition will accelerate this. BMS has a strong position with military and public safety agencies throughout the Middle East. Combining BizLink's AVDS systems with BMS's regional incumbency uniquely positions us to support agencies as they upgrade their networks to support the latest in low latency video centric IP networks. We're only one full quarter into integrating BMS into our platform, but we are very encouraged about the possibilities of serving a wider audience and growing revenues accordingly. Furthermore, we're actively identifying promising opportunities in drone communications and control networks. VMS is particularly active in this under-penetrated sector, providing us with additional avenues to enhance our presence and expand our MilGov business. We are well-positioned to expand our customer base as we prioritize fortifying our partnerships and converting our robust pipeline into tangible sales. As we look ahead to the remainder of 2024 and beyond, our strategic priorities remain clear. To enable software and services sales of our proprietary hardware platforms, increase our share in the middle gov markets, and exploit operating leverage to drive positive cash flow. Our three-year plan outlines ambitious financial targets and expansion initiatives, which we are competent in achieving. With a strong sales pipeline, the highest post-pandemic backlog, and a focus on operational excellence, we are well prepared to navigate the opportunities that lie ahead. Alison, please provide the appropriate instructions.
spk00: Thank you. And we will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. Our first question today will come from Brian Kinslinger of Alliance Global Partners. Please go ahead.
spk01: Great. Thanks so much. Solid results. At a high level, maybe you can talk about the revenue growth drivers. how much of revenue came from BMS and then maybe the contribution and or growth rates from say, you know, the different focus areas of your business.
spk03: Hey Brian, good morning. Thanks for joining.
spk01: Good morning.
spk03: A couple of points. You know, the BMS, the numbers from BMS for Q4 were, We're nominal as we just completed that in September. When we look at where we see growth, number one is AVDS. As we mentioned, we're seeing tremendous growth, and we expect to see tremendous growth in that combined with the BMS acquisition. The video data transport, where we bring surveillance cameras back to control, typically overbotted cellular, that area has been growing. We see that in the 20% type growth range. In the traditional markets of camera access video, you know, we expect those to be in the 10% range. And then lastly, the Control C2 area. It's a new market for us. We mentioned we see 75% going into this year. And, you know, as you can imagine what happened globally with the geopolitical events, we see that as a tremendous market growth for us, but it's still early.
spk01: And what percentage in the port quarter was milgov?
spk03: Mike, do you want to take that one?
spk02: Yeah, I mean, it was roughly split, Brian, about half and half. Half milgov, half live production? Live production, yeah, about half and half.
spk01: Okay. Well, we didn't hear much about live production throughout the call, so... what is happening there and are you seeing increased demand there? That's an area where, you know, I think that there's been weakness over the last few years. So maybe discuss, you know, that market environment.
spk03: Yeah, we still do. I think, you know, what we're seeing, you know, there's a tremendous appetite for live entertainment and live sports. You know, I think a great example today, one of our partners, Uh, MotoGP was just acquired by Liberty Global, uh, this morning for over 4 billion euros. Um, so there's a massive appetite for that. So we're seeing, um, as we mentioned with the Zoom acquisition, with the, um, Aspire, E2RL, uh, that deal. So we're seeing growth in that area. I think, um, the reason why we didn't talk a lot about it is, you know, we've made this, um, uh, MilGov, uh, is, is growing at a higher rate than we've, um, with the combination of BMS acquisitions position ourselves very well in those markets. And the beauty of it too, Brian, as we mentioned there, we're just leveraging the same product set effectively, the same hardware infrastructure and software overlay that we use and we're able to repurpose into those different use cases.
spk01: Got it. And then as it relates to the pipeline, thanks for that. Can you break down that? I mean, I assume CBDS is at the top, but maybe break that and other MilGov opportunities versus live production down maybe by its contribution to that. And is there any geographic concentration as well?
spk03: Yeah, I think, you know, the geographic concentrations consistent with what we've seen, you know, typically, Um, 40 to 50%, uh, America's the balanced, um, rest of world. Um, and then we are seeing, um, a higher percentage than traditionally around no gov, but the live production remains strong. You know, I think one, one thing you asked us to talk about is, you know, what, what we see in, in, uh, Q1, and we were happy to report, we expect Q1, uh, our revenue will be higher than, than before.
spk01: Higher than before, meaning last year's $7.1 million? Higher than Q4. Higher than what we just announced before. Got it. Thank you. And then as it relates to BMS, I think you said last call that was a struggling business. You needed to reengage your customers. There was opportunity to refresh their customer basis technology. How have those conversations progressed? Fantastic.
spk03: We're thrilled. with the BMS acquisition. The customer base had had a long tradition of working with BMS. They loved the team there, loved the products, and were really concerned as they went through the difficulties they went through post-pandemic. As I mentioned to you, pre-pandemic, they were a $20 million business and then struggled through the pandemic. And customers were really very positive, the fact that now they had a well-funded business business that acquired them. So all those conversations to the customer have been very positive.
spk01: And then you had mentioned the fourth quarter was a nominal contribution to revenue. With those conversations improving and being fantastic, when do you expect this to be a significant revenue contributor to your business?
spk03: First half, second half? I think we'll see improvements each quarter.
spk01: Okay. I guess lastly, you started the call with saying that you wanted to provide three-year targets. Maybe I missed them. Did you provide actual revenue? or maybe margin profile, maybe any long-term, what could this business look like in three years? Or do you, what are the goals of what this business will look like?
spk02: Yeah, Brian, this is Mike. Obviously, we're not providing guidance, but when we look at the business out over the next few years with the growth in MilGov, you know, the acquisition of BMS and the higher percentage that we're looking for for the services and software revenue, we have an outward target of trying to double this business in the next three years on the top line. Thanks so much.
spk03: Brian, to answer your question on BMS growth, one thing to point out is what this opportunity has given us, BMS has a strong customer base. What they didn't have was a next-generation product line, and that's what we've been working on. and that we brought to market in the Aerolink in our AVDS platform. So we're in the process now of transitioning their customer base to meet their needs from a legacy standpoint with the historical BMS product line and then make the technology transformation. And the value that the acquisition brings us is now our transmitters will – will work with, will operate with their receivers that are incumbent in the market. And then as those customers upgrade their receive sites and the overall software platforms will be the obvious solution for that.
spk01: Okay, thank you.
spk02: Thanks, Brian. Thanks, Brian.
spk00: And at this time, we will conclude our question and answer session. I'd like to turn the conference back over to Mickey Miller for closing remarks.
spk03: Thanks, Alison. Our vision, first of all, thanks for joining us today, everyone. Our vision of innovation to entertain the masses and to make the world safer continues to drive our path forward as we execute our mission to deliver high-quality products and services to our clients while providing return to our investors. We're humbled to have the opportunity to do so and very much appreciate the support of our investors. We ensure that we are acutely focused on growing this business and providing our investors with solid returns. With our collective efforts and shared vision, I believe that VizLink's best days are ahead of us. Thank you.
spk00: Thank you for joining us today for VizLink's fourth quarter and full year 2023 conference call. You may now disconnect.
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