Boxlight Corp Q3 FY2022 earnings call

Management Statement and Operational Highlights

• Quarterly Performance: The third quarter was the strongest to date with $69 million in revenue and $10 million in adjusted EBITDA. Revenue grew 13% and adjusted EBITDA 38% year-over-year, with 8 consecutive quarters of double-digit revenue growth.
• Product Launches: Introduced new generation interactive flat panels (55-98 inches), all-in-one LED video walls (120-220 inches), Clever hub wireless presentation system, and updated education platforms (Lynx Whiteboard, MimioConnect).
• Market Share: Gained market share globally. In the U.S., market share of interactive panel displays (IPDs) increased from 5.3% in Q1 to 8.4% in Q3. In Europe, market share rose from 5.6% in Q1 to 6.6% in Q3.
• Acquisition: Acquired FrontRow in December 2021, integrating its audio and campus communication tools into the broader solution suite under the brand Attention.
• Cash Flow and Balance Sheet: First time generating positive cash flows from operations for both the 3 and 9 months ended September 30. Ended Q3 with $22 million in cash, $49 million in inventory, and $62 million in working capital. Debt balance was reduced to $55 million post-quarter end with a $4.25 million principal payment.

Segment Performance

• Revenue: Third quarter 2022 revenue was $69 million, a 13% increase year-over-year. Year-to-date revenue through September 30, 2022, was $179 million, a 26.8% increase from the prior year.
• Product Segments:
  • Interactive flat panels (Mimio and Clevertouch) accounted for 67% of Q3 revenues.
  • FrontRow audio solution contributed 8% of revenues and 14% of gross profits.
  • Hardware (flat panel displays, classroom audio solutions, device accessories) made up approximately 96% of total revenues in Q3.
  • Software, professional services, and STEM solutions comprised the remaining portion.
• Gross Margin: Q3 gross profit margin reached a record 31%, up from 25% in Q1 and 28% in Q2. The company guided for Q4 gross margin to be greater than 30%. Year-to-date gross profit margin was 28.2%.

Guidance

• Q4 Guidance: Revised Q4 guidance to $48 million in revenue and $2 million in adjusted EBITDA.
• Full Year 2022: Full year guidance is $227 million in revenue and $18 million in adjusted EBITDA, representing 23% revenue growth and 49% adjusted EBITDA growth compared to 2021.
• 2023 Outlook: Expect double-digit revenue growth in 2023 and significant improvement in gross profit and adjusted EBITDA margins.

Risks

• Foreign Exchange Impact: Weakening of the pound and euro against the U.S. dollar impacted financial results. If FX rates had held constant, Q3 revenue and adjusted EBITDA would have exceeded guidance.
• Demand Slowdown: Experiencing slowing demand in recent months, contributing to the revised Q4 guidance.
• Competition: Potential for increased pricing competition as the company gains market share and in a potentially weaker market.

Question and Answer

Q: Factors driving reduction in Q4 revenue and EBITDA guidance?

A: Half of the reduction can be attributed to foreign exchange, and the other half to slowing demand across various regions, with more impact in EMEA than the U.S. though significant funds remain in the U.S. to be spent.

Q: Next year growth despite potential market decline?

A: The company remains confident in taking market share as it is still a small player in the market, especially as technologies refresh.

Q: Stimulus spend in education?

A: Vast majority of the $123 billion U.S. stimulus funds for education have not been spent. School districts had a brief lull after buying solutions, but substantial money is still available for investment.

Q: Pricing environment and gross margin outlook?

A: Gross profit margin improved to 31% in Q3, with expectations to stay north of 30% in Q4 and 2023. Benefiting from lower freight costs, but competition may lead to pricing pressures, with reliance on other solutions to maintain margins.

Q: FrontRow performance and outlook?

A: FrontRow experienced demand decline post-COVID, but has a positive long-term outlook with a broader partner network, global expansion opportunities, and integrations with the broader solution suite.