Boxlight Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 10, 2023

There are 7 speakers on the call.

Operator

Afternoon. This call is being webcast and is available for replay. The remarks today will include statements that are considered forward looking within the meaning 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. 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.

Operator

Afternoon. 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. 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. The company has provided reconciliations to the most directly comparable GAAP financial measures in the earnings press release, which will be posted on the Investor Relations section of the company's website at boxlight.com.

Operator

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 the call today. After I'd like to start by thanking all of our supporters across the globe, including our employees, business partners, customers and shareholders. We have the most talented team in the industry, including our executive team members, Mark Starkey and Greg Wiggins, who will share with us today as well as Hank Nance, our Chief Operating Officer and Sean Marklu, our Chief Technology Officer. Hank and Sean bring decades of industry specific experience, have been instrumental in developing and maintaining our best in class product suite and support organization. Over the last few months, we have attracted Several new team members, including Karen Adams, Vice President of Professional Services, joining us after 16 years at Promethean Clint Knudson, Vice President of Sales covering the Western U.

Speaker 1

S. And industry veteran of 15 years, including 11 years at our largest channel partner, Bloom Julia Moore, Sales Director covering Germany and Austria, also previously at Promethean and Mark Tilsley, Enterprise Sales Director for the EMEA region, bringing over 20 years experience, including 14 years at Maverick Tech Data. Our employee retention has For the Q1, I'm pleased to report we delivered $41,200,000 in revenue and $3,300,000 in adjusted EBITDA, exceeding our guidance. For the trailing 12 months, we have delivered $212,000,000 in revenue, 32% gross profit margin and $22,000,000 in adjusted EBITDA. In addition to our company wide focus on improving margins, we have also taken a conscious approach to reduce operating expenses where appropriate.

Speaker 1

For Q1 2023, we reported $15,300,000 in operating expenses, a reduction of $700,000 compared to Q1 2022. We will continue to consider ways to optimize organization for both continued growth and maximum profitability. As of March 31, we maintained a strong balance sheet including $11,000,000 in cash, from March 31, 2022. We continue to expect modest single digit revenue growth for the full year 2023 with the bulk of that growth coming during the second half of the year. For Q2 twenty twenty three, we are guiding to $50,000,000 in revenue $4,000,000 in adjusted EBITDA.

Speaker 1

Our confidence in delivering full year revenue growth is based on our global sales pipeline and an increase in significant tenders in key global markets. Additionally, there are still substantial government funds allocated for the purchase of education technology solutions, particularly in the U. S. And certain European markets. In the United States, 1,000,000,000 of dollars of ESSER funding are still set to expire if not obligated by September 2023 2024.

Speaker 1

Over the next few quarters, school districts will be making significant purchasing decisions to utilize the allocated funds. We recently filed our annual proxy statement and provided notice of our annual meeting on Tuesday, May 23 at 11 am Eastern. We invite all shareholders to cast their proxy votes prior to the meeting. We have requested your support for several proposals, including the re election of our 7 board members, the ratification of our audit firm, approval on an advisory basis of our executive compensation, an amendment to our equity incentive plan increasing the number of shares available for issuance and authorization for our Board of Directors to effect a reverse stock split if deemed in the best interest of our shareholders at any time prior to July 2, 2023. Market valuations have been challenging over the last year, particularly for Microcap Technology Stocks driven by broader economic concerns.

Speaker 1

As a result, despite our positive financial performance, program we announced earlier this year, repurchasing our stock during times we have excess cash flows from operations and are trading below our intrinsic value. Afternoon. We have a significant competitive advantage as a U. S. Company that is committed to data privacy and security.

Speaker 1

Our software solutions that store sensitive student and user data are developed and hosted in the U. S, afternoon. We are unique in that statement as our key competitors are foreign owned and controlled. We continue to offer the most comprehensive integrated solution suite in the industry and are consistently enhancing our existing solutions and introducing new products to market. Last quarter, we launched a number of new products, including our LED video walls, non interactive screens for the U.

Speaker 1

S. Market and Clever Hub meeting room collaboration solution. We have started to gain traction with our new products and it began shipping to customers. This quarter, we are launching our new generation interactive displays from Mimio and Clever Touch and will be the 1st in the industry to include a full This is a significant advancement in the interactive touch screen industry and we look forward to developing our solutions further with Google. Our EOS Education Professional Development team is also certified with Google, having an education services partner specialization in Google Cloud Partner Advantage.

Speaker 1

With the partner specialization, our EOS Education team has the capability and capacity and building customer solutions in the education services field using Google Cloud Technology. Our dedicated training specialists provide customized professional development, supporting educators using Google platforms in classrooms and schools efficiently and with confidence. In January, we received 10 awards from Tech and Learning for several of our hardware, We are demonstrating thought leadership, significant product innovation and meaningful financial growth. By staying the course to realize our mission to be the industry leader, we will in turn deliver durable long term value to our shareholders. With that, I will now turn the time over to our President, Mark Starkey.

Speaker 2

Thank you, Michael, and good evening from London, and solutions that we will be launching this summer, including our latest Google accredited solutions for the classroom. As the world returns to some form of normality post pandemic, we are seeing a return to the more usual EdTech buying patterns in both the U. S. And EMEA, Order intake in Q1 was $41,500,000 down 35% year on year and with 50% being derived from the U. S, 47% from EMEA and 3% from Asia Pac.

Speaker 2

Interestingly, despite order intake being down, We continue to grow our market share with our U. S. Market share increasing from 5.3% to 7% year on year Some of our key orders in the U. S. Included $4,400,000 from GDI, a U.

Speaker 2

S. Distribution partner $2,200,000 from Bloom, dollars 1,600,000 from data projections in Texas and $1,300,000 from Advanced Classroom Technologies. Overseas, we have some excellent orders, including $1,400,000 from Fish Off AG, our partner in Switzerland There is a lot of focus in Germany to gain traction in the corporate market where the margins are much higher. As a result, I'm pleased to report that our Q1 margin increase by 26% year on year in Germany. We recently also invested in our first showroom in Germany based in Dusseldorf with an expectation to open in the next few months.

Speaker 2

We also won some significant tenders in Germany during Q1, and an 800 screen order for 86 inches impact max screens in Dusseldorf. We have 15 other tenders currently in the bidding process, and we hope to report next quarter on the continued success and expansion in Germany. Finally, I want to mention a few words about our development in Africa. Africa may not be our biggest market, but we are passionate about building the best education solutions possible and supporting emerging markets. We have a fantastic dedicated partner in Africa, IABS, who share our passion for innovation and solutions and have grown our business to be the number one interactive screen for education in Africa.

Speaker 2

During Q1, they won 2 large projects in the education after and also opened a second experience center in South Africa. They are expanding rapidly across territories in Africa and recently trained over 200 educators in Namibia and hosted their first partner event in Botswana. In summary, Q1 order intake and revenues were down, but our profitability continues to improve. Our expectation is that we will return to revenue growth in the second half of the year as there remain significant funds available for education establishments to invest in technology. Afternoon.

Speaker 2

With that, I will now turn the call over to our CFO, Greg Wiggins.

Speaker 3

Thanks, Mark, and good afternoon, everyone. I will now review our Q1 results. For the 3 months ended March 31, 2022, resulting in an 18.6% decrease. FX headwinds continue to after tax operating revenues in Q1 2023 compared to the prior year quarter. On a constant currency basis, operating revenues decreased approximately 14% for the 3 months ended March 31, 2023.

Speaker 3

Taking a closer look at Q1 2023 revenues, EMEA revenues totaled $18,300,000 or 45 percent of our total revenues. Americas revenues totaled $21,300,000 or 51% of our total revenues, while revenues from other markets totaled $1,500,000 or 4% of our total revenues. Our top 10 customers represented approximately 40% of total sales in Q1 with the single largest customer at approximately 11% and are based across a number of markets, namely the U. S, U. K.

Speaker 3

And other European countries. Approximately 63% of total sales are covered by the top 20 customers. In Q1 2023, hardware comprised the largest proportion of total revenues at approximately 90%, of which approximately 69% related to our flat panel displays with the balance related to classroom audio solutions and device accessories. 1, 2023, was $15,100,000 as compared to $12,600,000 for the 3 months ended March 31, 2022. Over the comparable 2022 quarter.

Speaker 3

Gross profit margin adjusted for the net effect of acquisition related purchase accounting was 38.3% as compared to 27.4% as adjusted for the 3 months ended March 31, 2022. And continued reductions in freight costs over the prior year period. Total operating expenses for Q1 2023 was $15,300,000 compared to $16,100,000 in Q1 2022. Other expense for the 3 months ended March 31, 2023 was a net expense of $2,700,000 as compared to net expense of $1,500,000 for the 3 months ended March 31, 2022. The decrease was primarily due to losses recognized from the change in fair value of derivative liabilities of $224,000 in Q1 2023, coupled with a gain on settlement of debt of $854,000 in the prior year period.

Speaker 3

The company reported a net loss of $2,900,000 for the 3 months ended March 31, 2023, as compared to net loss of $4,900,000 for the 3 months ended March 31, 2022. Net loss attributable to common shareholders was approximately 3,200,000 and $5,200,000 for Q1 2023 2022 respectively, after deducting the fixed dividends to Series B preferred shareholders of 317,000 in both 2023 and 2022. Total comprehensive loss for the 3 months ended March 31, 2023 was $2,400,000 compared to total comprehensive loss of $6,600,000 for the 3 months ended March 31, 2022, and $1,800,000 loss for the 3 months ended March 31, 2023 and 2022 respectively. Quarter ended March 31, 2022. Adjusted EBITDA for Q1 2023 was $3,300,000 as compared to $1,200,000 for Q1 2022.

Speaker 3

Adjustments to EBITDA include stock based compensation expense, and the effects of purchase accounting adjustments in connection with recent acquisitions. Turning to the balance sheet, at March 31, 2023, 179,600,000 in total assets, dollars 44,400,000 in debt, net of debt issuance costs of 5,000,000 and $49,800,000 in stockholders' equity. At March 31, 2023, Boxlight had 75,100,000 common shares issued and outstanding

Operator

afternoon. And the first question today is coming from afternoon, Brian Kinstlinger calling from Alliance Global Partners.

Speaker 4

Good evening, guys. Thanks for taking my questions. Afternoon. You said you expect modest single digit revenue growth. Sorry to ask, but is that constant currency of reported revenue?

Speaker 4

And then with the drop in orders, what gives you the confidence that you can offset 16% to 18% year over year decline in the first half, especially Jim. Sure. Essentially, with the single digit revenue, A, I'm curious if that constant currency or reported revenue. And then with the drop in orders and with the guidance year over year revenue declining 16% to 18% in the first half of the year, What gives you the confidence that you can hit single digit revenue growth for the year, especially in light of your comments, the first and the fourth quarter are seasonally weak,

Speaker 3

afternoon. I think part of that is from that gives us a little confidence in that is, 1, just the tenders we're seeing currently that are being placed and the level of activity. Also, we think there is a little bit of pent up activity afternoon. Just following the slowness in the first half of the year, we don't expect double digit growth for the full year. We expect There would be just modest growth, but we think even for Q3 and Q4, we expect a stronger Q3 and Q4 compared to

Speaker 4

Okay. But you're talking about total year over year revenue, if not just growth in the second half of the year. Is that right?

Speaker 3

That's correct. Yes.

Speaker 4

Okay. And then first, sorry for help on the dictionary here for me. Are tenders actually orders? Are they kind of RFPs? I'm not really sure what tender is.

Speaker 4

But then the bigger picture the bigger question is, you can talk about the pipeline today Deals that you're looking at versus maybe a year ago, are there more, are there less, is there more an aggregate value or less, maybe from a U. S. International

Speaker 2

Yes. It's more of a pipeline growth. So what we're seeing is, Obviously, in Q3, Q4, we started last year, we started to see order intake slow down and that's continued in Q1. We expect that's continued in Q2 Sue a little bit. There is significant activity, especially in the U.

Speaker 2

S. And we see every week The amount of opportunities being registered in our pipeline, quite significant increases. Afternoon. So that gives us some level of confidence that we think ultimately the school districts are going to have to start ordering soon. We think that will probably be more likely Q3, Q4.

Speaker 2

And that's similar to kind of what we're seeing in EMEA as well. So we know that there's been kind of a post pandemic slowdown, But we expect ultimately that the education spend will continue.

Speaker 4

And just to be clear on the pipeline, Again, maybe you can't answer, but maybe you can. Sorry to ask this again. Is the pipeline in aggregate U. S. And international more than, say, a year ago?

Speaker 4

About similar, I know you're gaining share, so you need a little less pipeline probably to grow, but I'm just curious how that kind of compares to last year?

Speaker 2

Yes, I don't have the exact number here in front of me, but generally, I would say it's increasing, the pipeline is increasing.

Speaker 4

Okay. One more question and I'll get back in the queue as I have others. Hey Brad, one more

Speaker 1

comment I

Speaker 5

was going to make. On the second part

Speaker 1

of your question about tenders, so we are seeing a large number of tenders or Several vendors or partners provide pricing and essentially bid for the business. And so with those larger projects, if we win several of those projects, which we expect to, of course, that will influence our numbers in a big way.

Speaker 2

Generally, it's outsourced.

Speaker 4

Okay. Last question I've gotten and I'll get back in the queue. Last quarter, you talked about an inevitable pricing pressure. Your gross margin this quarter was quite impressive. In fact, the historical trend is obviously higher than any other quarter.

Speaker 4

Afternoon. You've talked historically about 30% to 32%. In this call, you talked about lower manufacturing costs and freight driving margin. Maybe help us with near term targets versus medium to long term on all of those things.

Speaker 1

Yes. So we've been quite conservative the last several quarters mentioning this north of 30%. Of course, we came in at 37% Q1. You remember Q4, we came in at 34%, Q3 was 31%. We've seen some nice growth there.

Speaker 1

We don't believe we can maintain the kind of the higher 34% to 37% margin. I think it's going to come back down. So we continue to say north of 30%. The reason we've come in higher than even what we've guided, it's just because We've done a good job of maintaining high pricing. So we have seen the benefits, as you mentioned, from cost downs and lower costs for transportation.

Speaker 1

Afternoon. We've also made it a conscious effort across the company to try to maintain this higher pricing and that's worked, but we're going to start seeing a lot more price pressure. We're starting to see already, Particularly in these larger opportunities and these bigger tender RFP processes, we're going to have to be slightly more competitive on pricing. And so We do expect that to come down in the short term, meaning over the next couple of quarters. Again, we believe north of 30%, but we believe that 37% is probably an anomaly.

Speaker 1

Now when you're looking out years, we do think that we can grow that gross profit margin, but that's less about trying to maintain high prices And that's more about us selling in additional verticals like the enterprise vertical, which is higher gross profit margin business as well as about broadening our product suite and selling higher gross profit margin products or solutions like software and professional development and accessories, And we've talked about some of those.

Speaker 4

Great. Thanks so much. I'm going to get back in the queue with my other questions.

Speaker 1

Great. Thanks, Brian.

Operator

Thank you. The next question is coming from Jack Vander Aarde from Maxim Group. Jack, your line is

Speaker 6

live. Okay, great. Thanks for taking my questions, guys. I appreciate the update. Michael, maybe I'll just Follow-up with a few of those questions that were just asked.

Speaker 6

It's good to see you still expect the full year growth for revenue, obviously, a big second half growth rebound. Can you maybe talk about how the current status of the corporate side of the business in terms of revenue mix is and as well as the Front Row business, which I think was a little bit subdued recently and in prior periods, but I know that's higher margin revenue and wondering if that is expected to have a strong recovery in the back half of the year as well. Thanks.

Speaker 1

Yes. Thanks for the question, Jack. Maybe I'll mention a couple of things. I'll have you jump in, Mark, and fill in some of the gaps. So first off, again, speaking on 1st year versus afternoon.

Speaker 1

On the first half of the year, given our guidance of $50,000,000 for Q2 plus $41,000,000 in Q1, we're going to come in somewhere around $91,000,000 is what we're afternoon. That's down about 17% from the first half of last year. So we definitely have a little bit of a mountain decline to be able to get to the single digit growth for the full year. But again, we think it's achievable mainly based on really our education business, which is the business that drives afternoon. Most of our sales and that's 90 plus percent of our sales is specifically K-twelve education.

Speaker 1

Now we are seeing growth in those other areas. And Mark, maybe you can talk a little bit about enterprise. And then let me say a couple of quick things about Frontrow and I'll have you talk about enterprise. So Frontrow was down a little bit last year. If I remember right, we came in around $23,000,000 of revenue last year.

Speaker 1

Gross profit margin was a little bit under 50%. We are going to see growth this year. Afternoon. We haven't published a number on that, but it is going to come in well north, we believe of about $23,000,000 Also the gross profit margin has been a little bit higher already in Q1 and beginning of Q2. So we're going to see, I believe, north of 50% gross profit margins.

Speaker 1

So that will have afternoon. Some movement for our total numbers, certainly. But then Enterprise, I'll have Mark talk about.

Speaker 2

Yes. Hi, Jack. So in terms of corporate or It blends probably just under 10% across the globe. We do expect and if you look at the future source data over the next 3 to 5 years, increase our average margins over time, which is why it's so important to us. So that's kind of how we're looking at corporate, if that kind of answers your question.

Speaker 2

Afternoon.

Speaker 6

Yes. No, that's very helpful. And I imagine I guess what I'm also trying to get a read through is with the strong gross margin, the record gross margin this recent quarter and the fact that front row is supposed to kind of higher margin, it's going to ramp up in

Speaker 1

the back half of the year it sounds.

Speaker 2

Front row had a great Q1, if I'm honest. I mean, we were pleased with the front row result in Q1.

Speaker 1

And that helped with the gross profit margin, but it really was more driven by a higher gross profit margins on our core panel sales. That's really what it was that did help bring that margin up to where it was. And like we said, we're going to see some compression of that margin on interactive flat panels. We'll maintain high margins in all the other solutions, But Interactive flat panel margins will come down a little bit. One more comment on enterprise, which I think maybe we've talked about the last couple of quarters, but we've really invested in our enterprise team, Particularly in the U.

Speaker 1

S, we've hired several individuals that are focused on enterprise and we do expect to see some substantial growth over the next few quarters in that vertical.

Speaker 6

And then just a follow-up in terms of I think you had drawn down a little extra on the credit facility or the debt to probably, I imagine, anticipate working capital for stronger strengthening orders. Is that kind of the read through there for that drawdown? And then also, can you just touch on your Maybe cash flow or liquidity expectations for the rest of the year? Thanks.

Speaker 3

Yes, sure. So Yes,

Speaker 1

that's right. Go ahead, Greg.

Speaker 3

Okay. Yes, that's right. We did draw down $3,000,000 on our delayed draw facility in April, and that was You're right, it's for working capital purposes. We're obviously ramping up for we expect to be an increased order activity period From a seasonality standpoint, this is a little bit lighter time of the year for us. We still have requirements under our credit facility to maintain certain cash balances as well.

Speaker 3

Those factors coupled with the fact that we paid down $8,500,000 of our debt in Q4 of this past year, A little lighter, but you probably saw that the $3,000,000 is going to be paid back by the end of September of this year. So afternoon. We feel like we will be easily able to pay that back out of our cash available on hand. We typically see our cash balance to slowly increase throughout the year. And typically, we have our more of the cash influx come in late Q3, early Q4 as we start to collect a lot of payments on the sales from the busier time of the year, which is typically late Q2, Q3 period.

Speaker 6

Great. That's helpful. And then maybe just one more in terms of OpEx, if I could sneak this in. So it sounds like, Michael, in your prepared remarks, it sounds like

Speaker 4

you guys have had a

Speaker 6

lot of talent come in the door from your competitors as well. So it sounds like you're really beefing up your professional staffing capabilities here. What does this do though for your OpEx as you look forward relative to where where it was last year and then this Q1. That just be anything there would be helpful.

Speaker 3

Sure. Afternoon. So as Michael mentioned in his remarks, we have brought in some really good talent. There's been a couple of positions that we've brought afternoon due to retirements or replacements of certain individuals that bring a lot of experience and not necessarily a net increase from an OpEx standpoint, if you're thinking from a salaries and wage perspective, our growth as it comes to a headcount Perspective is really just through the normal revenue growth that we want to obtain. Afternoon.

Speaker 3

We have, I think, done a good job of controlling OpEx over the last year, kind of post the Front Row acquisition. We're kind of reaching an optimal level, I think, for the year, for 2023. Yes, so we were obviously about $700,000 less Q1 over Q1. Afternoon. Some of that was some third party contractor costs we've been able to save in other areas afternoon.

Speaker 3

We've been able to be more efficient with, I think you'll see Q2, Q3 and really the duration of the year start to trend more to the way it was last year, such that on an annual basis, we'll probably be

Speaker 1

Thank you, Jack.

Operator

Thank you. The next question is coming from Daniel Zuletta from Truinversion. Daniel, your line is live.

Speaker 5

I had a lot of question about sales that were asked before. So I want to skip to the incentive plan. In 2021, you asked for 5,000,000 shares that were supposed to last 3 years. And now you're asking for 7,500,000 And it's increasing 50%. I want to know why you're asking more since sales are not growing that fast.

Speaker 1

The shares for the pool, really is to make sure we have the proper allotment to be able to meet the needs of the future. So that's first off, right. And just by making the pool available doesn't necessarily mean that we will issue those right away, but we'd like to have a pool of shares available. As far as the number of shares that we issue and we try to meet the industry standard and issue compensation based on what we need to attract top talent. And that's a combination of working with our Board of Directors and talking to you as an executive team, but also with your professional third party organizations that have also helped recommend what compensation should be including share issuances.

Speaker 1

And so given our size, I understand the concern given the market cap the company, but given our size, a $200,000,000 plus company, we try to set compensation for executives and other team members and then equity piece. And I would add one more thing that I think we want our executives in particular and our Board members to hold shares in the company. I mean, us holding shares aligns us with our shareholders where we want the share price to go up because that's how we're compensated to make money as the share price goes up. I don't think as shareholders myself being 1 that we would want our executives and decision makers not to hold shares and be aligned. And so We believe that's actually a way to align executives to the shareholders by making sure again they hold shares that are substantial enough to make a difference.

Speaker 5

All right. Thanks for the invite. And another question, Michael, Have you considered any time window for the buyback? I know there's no time because of the cash flow. But is it a price Too low to start buying back, let's say the market cap is $10,000,000 I guess $1,000,000 of buyback takes down 10% of the company.

Speaker 5

I mean is there a price too low to consider start buying now?

Speaker 1

Yes. So we clearly think that the stock price is well below where it should be and the company is significantly undervalued. There's no question about that. So utilization of the repurchase program though it will be a function of a couple of things. One is it requires Board approval.

Speaker 1

So we talked to our Board about it and we're going to make sure we utilize that afternoon when we and the Board thinks it's the appropriate time. Secondly, we can only use the stock buyback program when we're in open trading windows. Afternoon. We've been blacked out until now for example, right. So we only have certain trading windows throughout the year that we can utilize the stock buyback.

Speaker 1

And then the third consideration really is around cash afternoon. When we have excess cash and the question is, how do we best utilize that cash to drive value to the shareholders? And that's a combination of investing in the business, perhaps paying down debt or perhaps buying back our stock. And so I would say we will consider all those factors over the next weeks months quarters. Afternoon.

Speaker 1

And when we do, we'll make that we'll make the shareholder base aware. But for now, we're just going to monitor things over the next few months afternoon and try to find appropriate time.

Speaker 6

All

Speaker 5

right. Thank you. And I guess last question about the reverse split. Do you have another file extension going on or it's just reverse split or the lifting? What are your choices there or your options?

Speaker 1

Yes, we've already gone through 2 extensions with NASDAQ. We do not believe there is another extension. Clearly, it would be great if we could have another extension and it is something we've asked about, but I don't believe or I haven't seen examples where NASDAQ is or the other option would be the reverse tax split. And so that's going to be something that we're going to consider over the next few weeks as we get closer to our deadline, which the deadline to comply We don't think it's in the best interest of the shareholders to have the stock delisted from NASDAQ. And so we clearly believe that's in the best interest of all of us to maintain our listing.

Speaker 1

And so again, if required, then we'll consider a reverse stock split. Now my belief maybe one more thought on that is, my belief on the reverse Financial results where we thought that the stock would recover and be north of where it should be, but market conditions have made that difficult. But even in the event that we have to Intrinsic value of the company that's going to be realized in the future, even if the share count is slightly lower, fine. We're going to continue to deliver Positive results, build a great company and the value will appreciate in time to where it should be.

Speaker 5

Great to hear, Michael. Just taking some in consideration the dilution, I mean, it's something like I understand it, but it's 16% of the That's the only thing that gives me a little worried, so I'll let you know. The last thing about

Speaker 1

Quick comment on that. I would say that's fair. So that's noted. I will say just because we authorize the pool doesn't mean the shares we issued. Afternoon.

Speaker 1

It's a pool that would be authorized for issuance.

Speaker 6

Of course, the Board will approve all

Speaker 1

the issuances at the time that we issue the shares. But no, that's a valid point and We will absolutely take that in consideration in the future as we look to potentially issue shares.

Speaker 5

Thank you very much. And last thing I didn't hear is about the Bloom partner. We had a lot of great news in the past, Samsung partnership, the merge from Trot with Bloom, But we haven't seen a ramp in sales yet. You I guess you said it's about the market, but What can you tell me about all these partners that you have partnerships you have made that they haven't worked out that well as we would expect?

Speaker 2

Yes. I mean, they have worked out very well. I mean, you're right. The market is definitely subdued compared to where we were 12 months ago. But Bloom is still a very, very significant partner for us.

Speaker 2

They were our 2nd biggest partner in Q1. So we still have a very significant relationship there. We're working on lots and lots of bids with them. So there's great relationship, lots of engagement and it's all in a good place.

Speaker 1

Yes. And I would say again, it's not so the revenue coming down slightly from where we thought we'd be and and down from last year for Q1 guidance for Q2. That's not a function of any one partner not performing. That's really across the board sales have slower and we've seen that through most of the globe that just sales have been a little bit slower. We believe that's a low, just a kind of slight low after a nice ramp and we think it's going to start to pick up again.

Speaker 1

In fact, we're starting to see that already as we've guided to, we expect the second half of the year to be a tremendous second half of the year.

Speaker 5

I'm sorry if all the questions are hard. Thank you for answering. I'm going back to the Those are

Speaker 1

all great questions. Yes, thank you. We love to get questions from shareholders. We always invite shareholders to call in, and so we appreciate that. Thank you.

Operator

Thank you. And the next question, we have a follow-up from Brian Kinstlinger from Alliance Global Partners. Brian, your line is live.

Speaker 4

Thanks. Two questions. First, You talked about unspent budget dollars for the year. That's one of the drivers of why you expect orders and revenue to start to pick up. Budget dollars mostly subsidized government dollars.

Speaker 4

And if you look back in the last 2 years

Speaker 1

Yes. So to answer the second half of that question, schools absolutely generally use all of their budget because generally budgets afternoon. In the U. S. And throughout the world, they use it to lose it and schools don't want to lose budget money.

Speaker 1

Also, if you come in under your budget, you have the risk of a budget adjustment the following year where afternoon. The decision makers may decide, hey, maybe you need less money this year because you didn't use all your money last year. So it's very rare You haven't really seen much of a decline in budgets, particularly budgets that are allocated to technology spend across the U. S. And in most of the markets in Western Europe.

Speaker 1

So they have nice still robust budgets. On top of that in certain areas they've gotten additional federal money as we've talked about on Previous calls here in the U. S. Being the largest, almost $200,000,000,000 allocated from the federal government to education spending, a lot of that spent on technology like the technologies that we sell. And the bulk of that the largest bucket of that, which was about $120,000,000,000 which was the ESSER III funds, The bulk of that still hasn't been spent.

Speaker 1

That's going to be spent this year, next year. But yes, budgets are robust. The money is there. The low in spending really I think was just a breather of a lot of these school systems and districts afternoon. They had been buying a lot of technology and then they took a break for a little while and I believe they're going to ramp back buying.

Speaker 4

Okay. And then one on the balance sheet, a follow-up. I think I heard Greg say $3,000,000 in September, but can you remind us of

Speaker 3

Yes. So as you remember, we paid down $8,500,000 in Q4. Now that was an amount that was due in February of 2020 afternoon. So we were able to pay that down a little bit earlier than expected. So that amount was paid.

Speaker 3

Our debt service costs on an annual basis range from $10,000,000 to $11,000,000 of which about $2,500,000 is principal payments. Those were so the $8,500,000 was the balloon payment, if you will, that was required to be made. Afternoon. And at this point, we just have our regular debt service requirements to be made aside from the $3,000,000 we just drew down on the delayed draw term loan Facility, which is due to be repaid by the end of September this year.

Speaker 4

So there's no more balloon payment is what you're saying? Correct. Okay. And then how much cash

Speaker 1

is your $2,500,000 of principal per year. Yes, the principal amortization is $2,500,000 per year, right? That's it. It was a 4 year term on the facility. So we're just over 1 year in, so we got just under 3 years left on that loan facility.

Speaker 1

Right.

Speaker 4

Yes. And the cash you have to maintain?

Speaker 3

Yes. On the cash we have to maintain, it's $4,000,000 afternoon. Global consolidated cash balance is $4,000,000 That was relaxed through the month of May to $1,000,000 Now obviously, we expect to be above those amounts throughout the time.

Operator

Afternoon. Thank you. There were no other questions in queue. I would now like to hand the call back to Michael Pope for closing remarks.

Speaker 1

Quarter 2023 conference call. We look forward to speaking to you again in August when we report Q2 2023. Thank you.

Operator

Afternoon. Thank you. This does conclude today's conference. You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.

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Earnings Conference Call
Boxlight Q1 2023
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