Boxlight Corp Q4 FY2022 earnings call

• Q4 2022 revenue was $43 million, short of guidance, but 7% growth on constant currency. Full year 2022 revenue was $222 million, with adjusted EBITDA of $19 million. - Strategic acquisitions contributed to growth, but also substantial double-digit organic growth. - In H2 2022, generated $8 million in cash flows from operations, paying down debt by $8.5 million. - Announced a $15 million share repurchase program. - Mark Starkey noted Q4 orders were $39.6 million, down 4.6% y-o-y, but US market share increased from 6% to 9.3%. EMEA market share expected to increase in 2023 with new German team. - Notable end-user wins included FrontRow campus communication platform in Texas, San Diego School District, LAUSD, and projects in Germany, UK, etc.

For the fourth quarter ended December 31, 2022, revenue was $42.8 million, a 2.7% decline from Q4 2021, but 7% growth on a constant currency basis. EMEA revenues totaled $16.9 million (40% of total revenues), Americas revenues were $25.1 million (58%), and other markets contributed $800,000 (2%). Hardware comprised approximately 93% of total revenues, with flat panel displays being a key component, and software, professional services, and STEM solutions making up the remaining 7%. For the full year 2022, revenue was $222 million. In Q4 2022, gross profit margin was 33.6%, an increase of 1,240 basis points over Q4 2021. Adjusted EBITDA for Q4 2022 was $2.6 million, compared to negative $2.1 million in Q4 2021.

• Expect modest single-digit revenue growth in 2023, with bulk of growth in second half. - Q1 2023 guidance: $40 million revenue, $3 million adjusted EBITDA. - Substantial government funds available for education technology in US and select European markets, expiring soon, driving potential spending.

• FX headwinds impacting revenue. - Slowing demand across the industry in H2 2022. - Potential price pressure on interactive flat panel displays. - Data security and privacy concerns related to foreign competitors.

Q: You mentioned lower demand was temporary. What gives confidence and when to expect demand to strengthen?

A: Michael Pope stated industry reports indicate greater demand later in the year, sales opportunity registrations and pipeline growth, plus additional sales team resources. Mark Starkey added $88 billion in ESSER III funds in US to be spent by September 2024. Michael Pope noted education buying season in US, with spending expected to kick in Q2-Q3.

Q: What happened to lower-than-expected demand?

A: Mark Starkey said FX had a huge impact in Q3-Q4. Michael Pope mentioned order intake slowed in Q3 2022, leading to lower revenues.

Q: Gross margin was high. Is it sustainable?

A: Greg Wiggins said margins expected to hold north of 30%, driven by FrontRow products, lower manufacturing and freight costs, and focus on higher margins. Michael Pope added focus on broader solution suite including software and accessories with higher margins.

Q: Any changes in pricing and competitive positioning?

A: Michael Pope said some competitors have more aggressive pricing, but Boxlight sells value through total solution. Broader price pressure expected on interactive flat panel displays, but focus on broader product suite for margins.

Q: Share buyback program?

A: Michael Pope said no shares bought yet, but will use when stock below intrinsic value. Expect cash flow growth to deploy towards buybacks and other investments.

Q: FrontRow demand outlook?

A: Mark Starkey said FrontRow solutions are picking up, integrated into ATTENTION! solution for campus safety, with sales force integration leading to more positive outlook.

Q: Cash flow outlook and use of cash?

A: Greg Wiggins said near-term focus on building cash reserves, paying down debt, with potential for share buybacks and reinvestment in organic growth.