Haivision Systems Inc.

Thank you for standing by. My name is Krista and I will be your conference operator today. At this time, I would like to welcome everyone to the high vision second quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. If you'd like to ask a question during that time, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw that question, again, press star 1. Thank you. I will now turn the conference over to Mikko Wischka, Chairman and Chief Executive Officer. You may begin.

Thank you, Krista. And good afternoon, everyone. Thank you, everyone on the call, for joining us today to discuss our second quarter and six-month results for fiscal year 2024, which ended on April 30th. Now, as demonstrated by the results we announced earlier today, our business fundamentals just keep getting stronger. We have been telling you that we will significantly increase our operational efficiency in adjusted EBITDA throughout the past 18 months, and our Q2 performance continues in that direction with some noteworthy highlights. I would like to begin with exciting news regarding our control room business transformation. to a higher margin, quote, manufacturer model from the old bespoke full integrator model. Now, this transition has exceeded our expectations and is progressing much quicker than previously planned. Now, we have always said that this transformation will be at the expense of top line. However, what is left is our proprietary high margin business, which is good business. This is something we've been planning for and working towards all year. And the great news is that we can see positive results already within the first six months of 2024. We expected this to be an 18 to 24 month transition, but it now looks like we'll accomplish the business transition within this fiscal year, which is great news. Our partners and resellers globally are very happy to see us embracing the partner model to scale this business and getting away from being an integrator and basically seen as a competitor, supplying these complete custom installations, including selling the third-party screens, keyboards, networking equipment, and even furniture. Now, this time next year, the net positive revenue gain will be more apparent, together with solid and consistent high gross margins. We expect to be training and preparing many of our strategic partners worldwide on the new Command360 fully scalable platform by the end of this year in preparation for a full-blown rollout in fiscal 2025, a full year ahead of schedule. Now, let me briefly discuss some of the numbers. Our Q2 gross margins were significantly higher than last year's Q2, going from 68.9 to 71.7. We've been saying all along that we would deliver increased gross margins. And once again, we continue to deliver what we said we would. We also delivered an adjusted EBITDA of $5.1 million, which represents a whopping 92% improvement from our previous Q2. And the impressive 14.8% operating margin was also the third quarter in a row we've seen the mid-teens level of operational performance again exactly as we promised we would deliver. It's also noteworthy to mention that our Q2 performance now gives us a 12-month trailing adjusted EBITDA of $20.3 million. Another impressive metric we promised to deliver back in 2023. I can safely say that we are well on our path on delivering on our promise of a two-year adjusted EBITDA nearly tripling the EBITDA performance from the $8 million derived in fiscal 2022. I'd say not many tech companies can say that these days. Now, we have also delivered yet another positive net income quarter with a noteworthy 162% increase over the last year's Q2. Again, demonstrating what we have been saying all along, that we will show much higher increase in our profitability And we expect this trend to continue throughout 24 and 25. Let me also add that our balance sheet has never looked so strong. As we have been saying over and over, we are moving quickly towards achieving our goal of delivering 20% EBITDA performance. And with our Q2 performance, it should give you even more comfort that this is going to happen. Let me quickly touch on some of the latest U.S. federal government budget delays and the continuing resolutions that marred the first half of the year for all federal government suppliers, not just HiVision. The constant political bickering and congressional delays in approving the budget has stalled or delayed projects within the military and federal government institutions throughout the U.S. We have seen many government suppliers feeling this pain throughout the industry. Now, the good news for HiVision is that we didn't lose any deals and no deals that we were working on were canceled, although several projects have been pushed to the right and have been delayed due to the inability for Congress to approve a timely budget. Unfortunately, I don't think we can expect to see any federal employees working overtime to catch up on the backlog. Thus, we should see the projects eventually coming back within the next few quarters. The good news is that the money is starting to flow again but will take a while to catch up to the normal levels expected at this time of the year. We do, however, anticipate the year-end buying cycle to be strong for the government September year-end, which is especially typical during the election year. We continue to see strong demands for our global security operational centers within the global financial banking industry, cybersecurity, police centers, federal installations, public safety, and in fact, all defense sectors. The need for our customers to have real-time, mission-critical and secure access to all their video sources and assets for real-time analysis or situational awareness is even more critical. Our investments in additional salespeople and focused business development worldwide with strategic partners will set us up for solid growth in 2025 and beyond. Dan will go through all the finances in detail, but let me reiterate our annual guidance we gave back in January. Delivering an adjusted EBITDA in the mid-teens is well on target, while delivering higher margins and growth in operational performance is also well on target. Considering our planned transformation on the control room business is way ahead of schedule, and some of the delays in federal spending, our top line will be lower than anticipated, but all of our profitability metrics are well on track. And this has been our main focus and the most important metrics for this fiscal year. A better than expected transformation of controlling business will set us up for a much healthier and profitable business moving forward. All in all, a great performance. Finally, we believe that Hivision has a very bright future ahead. As we have now delivered, not just promised, but delivered a trailing 12-month adjusted EBITDA of $20.3 million, as I said, That cannot be taken away from us. It is no longer a promise. It is our actual performance. We are committed to maximizing long-term value for all of our shareholders. We are confident in our ability to execute on our strategic plan and deliver continued growth and even higher operational performance. I hope that the investment community will finally realize that we are significantly undervalued in terms of both revenue and now even on our EBITDA multiples. So Dan, please feel free to continue with the detailed financials.

Thank you.