Boxlight Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 8, 2023

Key Takeaways

  • Q3 revenue fell 28% year-over-year to $50 million, driving a net loss of $17.8 million despite a gross profit margin improvement to 36% and adjusted EBITDA of $4.9 million.
  • Order intake rose 11% in Q3 to $48.5 million—the first quarterly increase in five quarters—suggesting an early indicator of returning revenue growth.
  • For Q4, Boxlight expects revenue and adjusted EBITDA roughly flat with last year, and projects modest full-year 2024 revenue growth from investments in the enterprise vertical, geographic expansion and an expanded product suite while cutting G&A expenses.
  • The company launched new Google-certified EDLA interactive panels and CleverTouch commercial displays with Google Play integration and Clever Live signage, earning ten industry awards in Q3.
  • Boxlight reduced debt by $15 million over the past 12 months to about $44 million, and plans to refinance for lower interest rates and improved covenants to boost cash flow.
AI Generated. May Contain Errors.
Earnings Conference Call
Boxlight Q3 2023
00:00 / 00:00

There are 6 speakers on the call.

Operator

Thank you, and welcome to the Boxlight Third 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. Today, we'll include statements that are considered forward looking within the meanings of securities laws, including forward looking statements about future results of operations, business strategies and plans, customer relationships, market trends and potential growth opportunities. In addition, management may make additional forward looking statements in response to your questions.

Operator

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 ks, Form 10 Q and other reports filed with the SEC. That 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.

Operator

The company has provided reconciliations to the most directly comparable GAAP financial measures and 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 Boxlight's Chairman and Chief Executive Officer, Michael Pope.

Speaker 1

Hello, everyone, and thank you for joining our Q3 earnings call. Following my remarks, you will also hear from Mark Starkey, our President and Greg Wiggins, our Chief Financial Officer. Greg is joining from our corporate office in Atlanta, Georgia. Mark and I are joining from Singapore, where we're attending the largest education conference and exhibition in Asia. As part of our company's growth strategy, we are evaluating geographic expansion in the Asia Pacific region, particularly in Indonesia, Singapore, Taiwan, Thailand, the Philippines and Vietnam.

Speaker 1

We're meeting with several distribution and retailer partners at the conference this week. For the Q3, we reported $50,000,000 in revenue, dollars 18,000,000 in gross profit and $4,900,000 in adjusted EBITDA. Revenue declined by 28% for the quarter and by 23% for the 9 months ended September 30 over the same periods last year. The revenue decline was largely a result of softer industry demand. However, we also didn't cash our market shares anticipated, specifically in key geographic markets and with certain product categories.

Speaker 1

We did maintain a strong gross profit margin reporting 36% for the quarter and 37% for the 9 months ended September 30, both an improvement over 31% 28% for the respective periods last year. And planning for the next several quarters, we have committed to be more financially conservative by reducing both our growth expectations and operating expense budget to ensure improved profitability. For the Q4, we expect revenue and adjusted EBITDA to be in line with Q4 last year. For the full year 2024, we anticipate modest revenue growth driven by investments in 1, our enterprise vertical 2, Certain geographic regions and 3, our expanded product suite. To drive improved profit margins, we will be reducing certain G and A expenses that we expect will have minimal impact on short term growth.

Speaker 1

We ended the quarter with a strong balance sheet.

Operator

Please remain on the line while we reconnect Michael's line. On the line while we reconnect the speaker line.

Speaker 1

Hello. Sorry about the technical difficulties. I believe we're back now. Great. So I'm going to jump back a little bit in our talk script.

Speaker 1

So I believe we talked about the 4th quarter expectations. Great. Did Did we talk about Q4 expectations? Okay. So for the Q4, we expect revenue and adjusted EBITDA to be in line with Q4 last year.

Speaker 1

And then for the full year 2024, we anticipate modest revenue growth driven by investments in 1, our enterprise vertical to certain geographic regions and 3 our expanded product suite. To drive improved profit margins, we will be reducing certain G and A expenses that we that will have minimal impact on short term growth. We ended the quarter with a strong balance sheet including $61,000,000 in working capital, of $18,000,000 in cash $44,000,000 in inventory. Our balance at quarter end was $48 our debt balance at quarter end was $48,000,000 Subsequent to quarter end, we paid down our debt facility by an additional $4,000,000 resulting in a current debt balance of approximately 44,000,000 Over the last 12 months, including the $4,000,000 payment, we have reduced our debt facility by $15,000,000 and the near term, we plan to refinance our debt with a lower cost facility, which will provide more favorable loan covenants and result in a substantial increase substantial interest expense savings. During the Q3, we officially introduced our Google EDLA interactive panels, CleverTouch Impact Luxe and Mimio Pro G.

Speaker 1

These new additions to our interactive panel lineup are the first to feature direct access to the Google Play Store. They're equipped with 50 touch points, cutting edge micro antibacterial glass and integrated NFC for quick user profile loading. Every Google EDLA certified Impact Luxe and Mimio Pro g display also includes accelerated level 1 and Level 2 Google certified training. We also launched our new range of CleverTouch commercial displays powered by award winning digital signage platform Clever Live. We're proud to offer a complete digital signage portfolio that supports all types of screen deployment requirements for customer environments in both our education and enterprise verticals.

Speaker 1

Our CleverTouch Centimeters Series display range includes high bright panels, kiosks, 16x7 and 24x7 displays, menu boards and LED video walls. During the Q3, we were honored to win 9 Best of Back to School Awards from Tech and Learning. The awarded products in hardware, software, curriculum and more categorized by grade levels. We earned awards in both primary and secondary categories for our Mimio wall LED displays, Mimio DS digital signage series, Mimio MyBot Recruit, CleverTouch Impact Luxe interactive display and front row feature action mic powered by Elevate wireless technology. This past Friday, Clever Log was also selected as the Digital Sinus Technology of the Year by the renowned AV Awards, a highly respected industry recognition judged by experts from end user organizations, consultants and industry leaders.

Speaker 1

This victory solidifies our position as a leading player in the digital sinus market. We published multiple success stories in Q3, including our success of teacher Daniel Thompson at Ron Clark Academy and Atlanta, Georgia, inspiring student engagement with our Lab Disc All in One Science Lab and of Cameron Heffner, a STEM teacher at Liberty Local School District in Youngstown, Ohio, who has enriched STEM learning with our award winning MySTEMKit STEM curriculum. Clever Touch's Success stories showcase comprehensive solutions for LYNX whiteboard software and Clever Live that enhance interactive learning, transforming classrooms into engaging hubs of education. We had 2 major rollouts with Worthy Down, part of the defense services in the U. K.

Speaker 1

The initial rollout was for 75 Clever Touch Impact touch panels with some on cards for collaboration and ad hoc signage. The 2nd phase enhanced campus communication via cloud based digital signage system using CleverTouchCM Series Displays and CleverLive for easy content management. These examples highlight Boxlight's commitment to innovative and effective solutions empowering all users. Lastly, I'd like to thank our shareholders, employees, reschedule our partners and customers for your continued support. With our dedicated employees and industry best solutions, we expect a return to revenue growth in 2024 and with stronger profit margins.

Speaker 1

With that, I will now turn the time over to our President, Mark Skarkey.

Speaker 2

Thank you, Michael, and good morning, good afternoon, and good evening to everyone on the call. Q3 was a tougher quarter than we had expected, and we continue to face challenging market conditions in both the U. S. And EMEA. Despite this, we managed to book $48,500,000 of orders in the quarter, which represents an 11% increase on Q3 last year.

Speaker 2

The return to growth order intake is key because it is an early indicator of revenue growth and our expectations are the business should start to return to moderate revenue growth in 2024. The U. S. Accounted for 48% of our total order intake during Q3, with 51% coming from EMEA and 1% coming from the rest of the world. Our market share for interactive flat panels increased marginally in EMEA in Q3 from 6.6% to 6.7%, a decrease in the U.

Speaker 2

S. From 8.4% to 6.3% due in the main to some large one off deals with other vendors. On a year state basis, and market share in the U. S. Has declined only marginally from 6.9% to 6.2% and in EMEA, it is broadly the same at 6% versus 6.1% last year.

Speaker 2

One of the main things that we are focused on is maintaining higher gross profit margins, and we have deliberately avoided some very low margin tender business, especially in Southern Europe, which is part of the reason for the marginal decline in market share. In other markets, we have made some strong gains, such as Australia, where we have increased our market share from 14.9% to 18.8% over the past year. In Finland, we grew our market share from 36.9% to 40.1%. And in Switzerland, we grew from 14.4% to 19.9% compared with last year according to data from FutureSource. We have very High market share in some other European countries such as Austria, where we have 36.7 percent Ireland, where we have 34.7 percent Belgium with 28.1 percent and Denmark with 22.7%.

Speaker 2

The most important market in EMEA remains Germany, and this is where we have the largest opportunity as our market share is relatively low at 5.2%. Over the past 12 months, we have doubled the size of the German sales and our expectation is that we can achieve double digit market share within the next 2 years. Some of our key orders in the U. S. Included $7,000,000 from ELB, currently our fastest growing partner $5,000,000 from Bloom $2,600,000 from Camamundi based in Puerto Rico and $1,200,000 from GDI, a U.

Speaker 2

S. Distribution partner. Overseas, we had some excellent orders, including $2,300,000 of IZINESS in the UK, dollars 1,200,000 from Cancom in Germany and $1,000,000 in Charmix International in Spain, to name a few. Our new generation of Google accredited cleratouch screens started shipping during Q3, and customer feedback has been excellent. Our Google accredited Mimio screens will start shipping during Q4 in the U.

Speaker 2

S. We believe these fully integrated Google screens will prove very popular for school districts. In the U. S, we had some fantastic wins, including over 3,000 panels and stands shipped to El Paso School District in Texas by our partner ELB. We also continue to supply more than $1,200,000 of panels to Las Cruces in New Mexico, again by ELB.

Speaker 2

We had some great wins in Michigan with over $1,000,000 of screens and audio solutions delivered by our partner DAT. In Dayton, Ohio, we won a very large order to supply our front row audio solutions across District worth over $1,500,000 via our partner Bloom. In the U. K, we supplied our first shipment of 1100 screens to the Welsh Schools by our partner IDMS worth approximately $1,700,000 We also had some great wins in Germany, shipping 600 screens under the kid tender by our partner Cancom worth approximately $1,200,000 We've also won the Dusseldorf tender for 400 screens, we shipped during the quarter worth approximately $800,000 In summary, despite Q3 revenues being down, We booked the 1st increase in order intake in 5 quarters, and we believe this marks the turning point in the cycle with a steady return to revenue and EBITDA growth. With that, I will now turn the call over to our CFO, Greg

Speaker 3

Wiggins. Thanks, Mark, and good afternoon, everyone. I will now review our Q3 results. Revenues for the 3 months ended September 30, 2023 were $49,700,000 as compared to $68,700,000 for the 3 months ended September 30, 2022, resulting in a 27.7% decrease and was due to lower sales volumes across all markets. Gross profit for the 3 months ended September 30, 2023 was $18,000,000 as compared to $21,000,000 for the 3 months ended September 30, 2022.

Speaker 3

Gross profit margin for Q3 2023 was 36.3%, which is an increase of 5 70 basis points over the comparable 2022 quarter. Gross profit margin adjusted for the net effect of acquisition related purchase accounting was 37.2% as compared to 31.6% as adjusted for the 3 months ended September 30, 2022. The improvement in gross profit margin in Q3 2023 compared to Q3 2022 is primarily due to lower manufacturing costs and continued reductions in freight costs over the prior year period. Total operating expenses for Q3 2023 were $29,600,000 and included a goodwill impairment charge of approximately $13,200,000 due primarily to lower sales volume stemming from the industry downturn and a change in the company's reporting segments in 2023, which resulted in a change in the company's reporting units. Other expense for the 3 months ended September 30, 2023 was a net expense of $3,100,000 as compared to net expense of $2,800,000 for the 3 months ended September 30, 2022.

Speaker 3

The increase in expense was primarily due to an increase in interest expense of approximately $400,000 partially offset by gains recognized from the change in fair value of derivative liabilities of approximately $200,000 in Q3 2023. The company reported a net loss of $17,800,000 for 3 months ended September 30, 2023, as compared to net income of $3,100,000 for the 3 months ended September 30, 2022. Net loss attributable to common shareholders was approximately $18,100,000 for Q3 2023 compared with a net income attributable to common shareholders of $2,800,000 for Q3 2022 after deducting the fixed dividends to Series B Preferred shareholders of 317,000 in both 2023 2022. Total comprehensive loss for the 3 months ended September 30, 2023 was $20,600,000 compared to total comprehensive loss of $1,900,000 for the 3 months ended September 30, 2022, reflecting the effect of foreign currency and translation adjustments on consolidation with the net effect in the quarter of approximately $2,900,000 loss and $5,000,000 loss for the 3 months ended September 30, 2023, 2022 respectively. EPS loss per basic and diluted share was $1.90 for Q3 2023.

Speaker 3

EPS per basic and diluted share for Q3 was $9,400,000 which included the goodwill impairment charge of $13,200,000 as compared to $8,500,000 EBITDA for the quarter ended September 30, 2022. Adjusted EBITDA for Q3 2023 was 4,900,000 as compared to $9,900,000 for Q3 2022. Adjustments to EBITDA include stock based compensation expense, impairment of goodwill, gainslosses from the remeasurement of derivative liabilities, gainslosses recognized upon the settlement of certain debt instruments and the effects of purchase accounting adjustments in connection with recent acquisitions. EBITDA loss for the 9 months ended September 30, 2023 was 3,000,000 as compared to $12,900,000 for the 9 months ended September 30, 2022. Adjusted EBITDA for Q3, 2023 was $13,700,000 as compared to $16,300,000 for Q3, 2022.

Speaker 3

Turning to the balance sheet, at at September 30, 2023, Boxlight had $18,400,000 in cash, dollars 61,400,000 in working capital, dollars 44,100,000 in inventory, of $180,300,000 in total assets, dollars 44,400,000 in debt, net of debt issuance cost of $3,600,000 and $30,600,000 in stockholders' equity. At September 30, 2023, Boxlight had 9,600,000 common shares issued and outstanding and 3,100,000 preferred shares issued and outstanding. At September 30, 2023, the company was not in compliance with the senior leverage ratio under its credit agreement. The company's noncompliance was cured by the company paying $4,000,000 principal in November, which would have resulted in the company being in compliance with the senior leverage ratio at September 30, 2023. The company is actively seeking to refinance its debt with new lenders that the company believes will be on terms more favorable to the company.

Speaker 3

Following the $4,000,000 principal repayment, the company's debt balance is approximately $44,000,000 Including the $4,000,000 paid in November Since Q3 2022, the company has repaid principal on its credit facility of approximately 15,000,000 We continue to strategically review our capital structure and use of free cash, including but not limited to paying down debt, executing on our share repurchase program and finding more attractive financing agreements to replace our current facilities. We believe that cash flow from operations will continue to support our ongoing operations without the need for additional equity or debt financing. With that, we'll open up the call for questions.

Operator

Certainly. At this time, we will be conducting a question and answer session. Your first question for today is coming from Brian Kinstlinger with Alliance Global Partners.

Speaker 4

Great. Thanks for taking my questions. Can you help reconcile the stronger orders you were seeing in July through the first Few weeks of August and even for the quarter. And you talked about that at the end of the second quarter sorry, in the Q2 conference call. Can you reconcile that with the lower than expected revenue?

Speaker 4

I think we were looking for a lot more than was delivered. Did you see order cancellations that may have made orders stronger, did some of the demand disappear? Just trying to understand what changed so quickly versus what we said, I think it was mid August.

Speaker 2

Yes. Hi, Brian. Look, I think basically, it was soft demand. We didn't have any canceled orders. We expected and I think the industry was expecting much stronger demand in Q3.

Speaker 2

We started to see that, but it just didn't really take off. And the second half of Q3 was a lot slower than we expected. So the bottom line is, it was just softer demand across the board, both in the U. S. And EMEA during Q3.

Speaker 4

And so you're right, Tom. Go on.

Speaker 1

Yes. We just had we ended the quarter with An increase in customer orders up 11%, just which we expected greater than that, but we did see a nice increase, but not nearly to the extent we thought. And then leading into Q4, I'll just mention, you probably heard that we're guiding really revenue to be flat, adjusted EBITDA to be flat with last year. And that's really as a result of Q3 being a little bit slower than we expected rolling into Q4, but we are still quite optimistic for next year. Looking at our pipeline, other indicators, we do believe we'll start to see growth again next year.

Speaker 4

I guess with the industry and even bauxite Expecting stronger demand, what are customers saying? They were at a conference now. You're seeing customers. Is it a lack of budgets? Have they already adopted enough new technology they're trying to digest in the classroom.

Speaker 4

What do you think has changed in terms of the market dynamic? Or what are you hearing that's changed?

Speaker 2

I think generally, Brian, it's just it's a customers just like not maybe as urgent as they were. I mean, Definitely, after the pandemic and the stresses on the global supply chains, there was a lot of urgency and a huge amount of orders being placed. And maybe some end users spend a lot of their budgets. And now We're looking at big projects, which I would expect in Q3. Now that's just delayed a few months.

Speaker 2

It's now happening in Q4. That's been pushed into the New Year. That's kind of what we're seeing. It's not a There's not one big thing. It's just a general people are not as urgent to place large orders and kind of just slowing down slightly.

Speaker 4

Now assuming revenue is flat year over year, I get that G and A cuts take some time, but you have much better shipping rates you've talked about, Much higher gross margin, if revenue was flattish, why wouldn't EBITDA be higher even marginally.

Speaker 1

Looking into next year, yes

Speaker 4

No, I'm just showing at the 4th quarter because the rates The rates were covered at the beginning of the year. I'm just looking at year over year in Q4. I get the next year is a different story.

Speaker 2

I mean, gross profit in Q4 last year, I think, was just under 34%. And I think we were running at a bit higher than that in Q3. So it's going to start to get marginal. You did start to see Gross profits increased at the end of last year. So I think it would be marginal differences.

Speaker 4

Okay. And then from the competitive landscape.

Speaker 1

Hey, Brian, this is just real quick comment on that. I think that's really been for this year, for for 2023. We started the year with a bit lower gross profit margin in Q kind of early in the year and kind of ramped or actually that was I guess really I guess beginning of last year, we had Q1 especially with stock. But we also ramped a little bit kind of this year and we have kind of higher gross profit margin. We've guided last quarter, we mentioned we didn't know that we could sustain 37%, 38% type margins, so that may come down some.

Speaker 1

So So I think in event to be conservative, Q4 going into next year, I don't know that you got to expect the 36%, 37%, 38% gross profit margin, but we ought to be kind of maybe close to 35% or so, something like that. And so if that's the case, then we're not going to be real far off before last year or so. Got it.

Speaker 4

Two more questions. The first one is

Speaker 3

Sorry, Brian, I was going

Speaker 4

to Okay.

Speaker 3

Go ahead, sorry. The margin for Q4 last year, just as a reminder, was close to 34%. So as Michael was saying, it was actually ticking upward toward the end of last year. And so while that's held and actually increased for a good portion of the 2023 year, We'll probably see that start to decline just a little bit. So the pickup from the margin increase when we're looking at Q4 won't Necessarily be as drastic as Not

Speaker 4

as great. Yes. And then on the gaining market share, you've been gaining market share for several quarters. Has anything changed from a competitive perspective? Number 1.

Speaker 4

And then in Germany, you're talking about the biggest opportunities to gain share. What do you think makes that market right for market share gains? And then I have one last question.

Speaker 1

Maybe I'll say a couple of things, Mark, and then you can jump in kind of more specifically. Yes. So if you look at this year, year to date, we have not gained and across the board in our major markets, U. S. And EMEA.

Speaker 1

If you look at those blended, as Mark shared in his portion of the contract, We didn't really gain much market share. So that was a little bit disappointing that that didn't happen. This year, we were relatively flat with the market. Now we did in certain geographies, we did have upticks and other ones we were down a little bit. But we're pretty optimistic that that can turn next that we will start to gain market share.

Speaker 1

Now, when we talk about market share data too, we're only really talking about interactive flat panel displays because that's the market share data that we subscribe to and we receive. We don't see a lot of market data around our other solution suite. But Speaking to growth in the next year, I'll talk a little bit more broadly and then Mark, you can talk maybe specifically at Germany and other markets. But talking more broadly, looking to next year, The reason that we think we can see some growth is because we've invested in the enterprise vertical. We're going to we know we're going to bring in Some new business in enterprise, so that's one.

Speaker 1

Secondly, we invested in certain geographies. You mentioned Germany, which Mark will talk more about, But that's an example of a geography where we're going to see some growth geographically based on people investments we've made in those areas. And the third is growth in our product suite because we've launched a lot of new products. If you look over the last 12 months, we launched our new line of non interactive displays. Those are new in the U.

Speaker 1

S. We didn't have those before. Our new LED video walls, newly launched this year. Our new media hubs, newly launched this year. Our EDLA interactive flat panel displays new this year.

Speaker 1

A lot of new integrations between our audio solution and our interactive flat panels, including our attention solution newly launched this year, large investments in our software in Lynx Whiteboard and Mimio Connect and Clever Live and other software solutions. And so A lot of these product investments, that's that 30 area where we expect to see growth. So even if the interactive flat panel display market is relatively flat next year, which we expect it to be in U. S. And EMEA.

Speaker 1

We are going to see some growth because of those investments in those various areas. And we think that because of that, we'll take a little bit of market share as well within IPD today.

Speaker 2

So I'll just quick one on Germany, Brian, because you're asking about Germany. So look, it's now the biggest market for IPDs in Europe. It wasn't until that's changed in the last 18 months, it's the biggest market. And across Europe in many countries, we actually have really high market share. And Germany, the one that stands out as being significantly lower.

Speaker 2

Last year, we were at 4.5% in Germany. We're now up to 5.2, but we hired and significantly like we doubled the size of our German sales team from like 5 to 10. And that's only really that happened over the last 12 months. Those guys are now starting to kick in in terms of really winning some big deals. The other thing is we've just Next week, we're actually flat to Germany and we're opening our 1st showroom in Germany.

Speaker 2

So again, it kind of gives us more presence in Germany and that will be a key market for us to grow and we think we've got the right team there to grow market share.

Speaker 4

Great. My last question on the debt covenants. It sounds like you're back in compliance after paying $4,000,000 if I have that right. What is the required covenant for the net leverage ratio or whatever covenant you missed, so we can gauge where you are or going to be in the future.

Speaker 3

Sure. So for Q4, it's it will be 2.5 times, And that's in accordance with the original debt agreement that we entered into. Obviously, as we've said, We're actively looking to seek refinancing on our credit facility and we're optimistic that we'll be able find a solution that will give us more favorable terms in the not too distant future. So we're optimistic about that. I would say that in terms of just overall leverage ratio, even despite the 4 quarter downturn the industry has experienced, again, which we've started to see some early signs of turnarounds that Even with the last four quarters being downturn, our leverage ratio has been maintained under 3 times, which I think speaks to the positive EBITDA we've been able to generate through our improved margins.

Speaker 3

So, it was down to 2.5, but

Speaker 4

You have to get to 2.5% or that's where you're going to be?

Speaker 3

2.5% is our requirement for Q4.

Speaker 4

Got it. Okay. Thank you.

Speaker 1

Yes. Thanks, Brian.

Operator

Your next question is coming from Jack Van Aarti at Maxim Group.

Speaker 5

Okay, great. Thanks for the update guys. And many of my questions have been asked, but maybe I'll just circle back to kind of and the guidance. So last quarter, the overall tone and just kind of verbal volume, which felt like you're Pretty confident in the Q3 outlook and obviously you had a slower back half than expected. But just looking at the Q4 guidance in relative to kind of the tone and body language from last quarter, how confident are you in hitting those targets for the 4th quarter?

Speaker 2

Yes. Hi, Jack. It's Mark Starkey. Listen, look, we're pretty confident I think we try to be more conservative on the Q4 call. We basically said look flat with 2022.

Speaker 2

Q3 was disappointing, right? Yes, in the second half especially, right? When we did our call 3 months ago, we did We could see we're going to definitely grow in order intake. We actually thought the growth in order intake would be higher than what it ended up with. We ended up with 11%.

Speaker 2

We thought it could be potentially north of 20%. So So it's definitely slower in the second half of Q3. We have been more conservative in our guidance for Q4, as I'd say.

Speaker 5

Okay. No, that makes sense. That's helpful. And then maybe just, Michael, you opened up the comments about Asia and everyone's Different geographical positions or locations. Can you just talk a little bit more about your expansion opportunity plans in Asia?

Speaker 5

And it sounds like you're somewhat early in maybe the evaluation phases, but when might you see some tangible results from any new potential Asia market

Speaker 1

opportunities. Yes. So right now, clearly, the biggest opportunities for growth for us are in the U. S. And then I would say Western Europe, particularly Germany.

Speaker 1

We're also seeing a lot more opportunity in Eastern Europe. We also I have an employee now in the Middle East and you're seeing more opportunities in the Middle East. So I think, again, the U. S. EMEA region are by far The largest growth opportunities for us over the next 12 months.

Speaker 1

But we're just starting to and we sell some in the APAC region, particularly Australia, do it quite well. And we have sold in other countries throughout Southeast Asia, not large quantities. But I would say we're optimistic we can start to see some meaningful growth even over the next 12 months in that region. But I would say if you're looking at, again, over the next 12 months in particular, it's substantial growth. It's really going to come from our kind of our existing territories over the next few quarters.

Speaker 5

Okay. And then maybe just in terms of some of the orders that were slower and the slowdown kind of happened in the back half of the quarter. Can you talk about maybe was there any nuance trends, a bigger slowdown in corporate enterprise versus your K-twelve education markets. So was there any sort of distinct trends there? Or was it pretty much just Was it really indeed general overall softness?

Speaker 1

Well, if you look at overall business, Enterprise is less than 10% of our total business. I mean, we are largely really largely K-twelve education company today. Now we're looking to grow that enterprise vertical and that's happening as we saw growth in enterprise and we think we're going to see substantial growth in enterprise next year. And so it wasn't enterprise vertical, it was for the education vertical that was slower than expected.

Speaker 5

Okay, understood. I think that's it for me guys.

Operator

We have reached the end of the question and answer session. And I will now turn the call over to Michael for closing remarks.

Speaker 1

Thank you everybody for joining the call today and we appreciate your support. We look forward to speaking again in March when we report our 2023 full year results. And press release.

Operator

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.

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