Boxlight - Earnings Call - Q1 2021

Transcript

Speaker 0

Thank you, and welcome to the Boxlight First Quarter twenty twenty one 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. The remarks today will include statements that are considered forward looking within the meaning of security 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. A detailed discussion of such risks and uncertainties are contained in the company's most recent Form K-ten and Form 10 Q and other reports filed with the 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 reconciliation 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 investors.boxlight.com. And with that, I will hand the call over to Boxlight Chairman and Chief Executive Officer, Michael Pope.

Speaker 1

Good afternoon, everyone, and thank you for joining our first quarter twenty twenty one earnings call. We completed another record quarter with $48,000,000 in customer orders, dollars 33,000,000 in revenues, 28% gross profit margin as adjusted for acquisition related purchase accounting and $1,600,000 in adjusted EBITDA, again outperforming our guidance for the quarter. We also reported as of March 31, 21,000,000 in back orders, a strong balance sheet with $10,000,000 in cash, 23,000,000 inventory, 22,000,000 working capital and $47,000,000 in stockholders equity. Our triple digit revenue increase over the same quarter last year is a testament to our winning expansion strategy through both organic growth and strategic acquisitions. We continue to benefit from unprecedented market expansion particularly in the education sector as schools return to in class learning and are utilizing increased technology budgets supported by substantial government funding programs.

Given our current order volume and growing sales pipeline, we are optimistic on the second quarter and expect to report revenue of $39,000,000 and adjusted EBITDA of more than $1,000,000 resulting in an expected 2021 with $72,000,000 in revenue and greater than $2,600,000 in adjusted EBITDA. In addition to our remarks today, I invite you to reference our shareholder letter published on April 27, which provides a more detailed accounting of our progress to date as well as insights on our growth strategy. While receiving record order volume, we have experienced some supply chain challenges including interruptions to inventory production schedules as a result of component shortages along with delays in the shipping and receiving of goods. We've also been managing cost increases for both hardware and shipping, which has resulted in reduced gross profit margins. These are global challenges and are not unique to us.

However, we believe we are managing better than most by extending our production planning and where we can, prices to our customers. As of today, we have scheduled production through the 2021 with anticipated lead times of four to six months on certain hardware solutions. On March 23, we acquired Interactive Concepts, our distributor in Belgium and Luxembourg extending our footprint in Europe. This transaction was part of a broader strategy to both improve our profit margins and maintain stronger relationships with our reseller channel and end users in that territory. Year to date, we've published 18 customer case studies highlighting successful technology implementations including in Canyon City Schools in Colorado, Shelby County Public Schools and Trinity Parish Schools in Kentucky, the Ridgeway School and the Bridge Academy in The UK and San Agustin de Bilbao Center for Higher Studies in Spain among others.

These case studies highlight the positive impact that our technology solutions have on learners including students with special needs, the strong future of STEM solution integration in classrooms, and the benefits of display technology for higher education and corporate environments. We will continue to produce a steady flow of educator and corporate success stories featuring our breadth of solutions. In early March, we announced both our Boxlight Virtual Classroom in Atlanta and CleverTouch Gallery in Central London. Our Boxlight Virtual Classroom is a fully staffed classroom space used to facilitate customizable live virtual education experiences utilizing our full solution suite. The virtual space is also used to host weekly education focused webinars to help educators understand how our solutions can best be used to optimize learning.

Our CleverTouch gallery in London showcases our state of the art collaboration touchscreens, commercial displays, digital signage and cutting edge LED video wall. The gallery features a boardroom, unified communications huddle space, informal meeting areas and hot desking space for partners and colleagues. Also in March, we launched CleverTouch Academy, an expansive hub of resources, tutorials, lesson plans, virtual self paced training, and detailed downloads designed for educators, trainers, trade partners and engineers. Earlier this week we announced our certification as a Google service partner in education with specialization in professional development for The US, Europe, Latin America, Australia and New Zealand. During Q1, we had some significant updates to our software platforms including the latest releases for Mimio Connect and Lynx Whiteboard which is now available in all major app stores including Google Play, Samsung, Amazon and Apple.

Mimio Connect has been enhanced with video and audio communication and additional classroom management tools. Our new Clever Touch Live platform is an ecosystem allowing users to deliver and manage digital signage, messaging, alerts and customizable user interfaces across any network. Our Mimio touch screens also feature Mimio Message, our digital signage platform and Mimio Market, our education app store. In addition to the updates to our platforms, we have also developed our next generation of interactive displays with several significant technology updates making them the most advanced on the market with anticipation to begin shipping later this year. As we continue to expand resources for educators, companies, partners, we are receiving substantial recognition from the EdTech and AV industries for our innovation.

During this year, both our MimioConnect blended learning platform and MyStemKits content earned awards from Tech and Learning magazine for best remote and blended learning tools in the primary and secondary school categories. Additionally, our Robo three d printers and MyStemKits curriculum and our MimioClarity classroom audio system were named as EdTech finalists by EdTech Digest. CleverTouch was shortlisted at the innovation awards for best place to work, best business growth, and best communication and collaboration product for the UX Pro with winners to be announced next month. As school systems identify needs for their teachers and students, many school systems are looking to government relief funding to purchase resources, materials and training. In The US, to assist school districts with accessing federal funding such as that provided by the CARES Act, the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act, we have developed and promoted support content and services.

This includes our newly released relief funding guide and expertise of our internal funding team to help decision makers navigate the process of acquiring this critical funding. I'm extremely proud of our progress through Q1 of this year led by our tremendous leadership team and talented hardworking employees. We are committed to our loyal partners and supportive shareholders and we will continue to drive results and realize our mission to be a global leader in providing interactive technologies. With that, I will now turn the call over to our President, Mark Starkey, to provide additional color on our sales efforts for the quarter.

Speaker 2

Thank you, Michael. Q1 was certainly a record quarter for us and I would also like to take this opportunity to thank all of our staff and our customers who have helped contribute to our success during the quarter. As Michael stated earlier, we booked over $47,000,000 of orders from our partners. That represents a 528% growth in order intake year on year and is a record for Boxlight. Some of our key orders in The US included $8,700,000 from T and E, dollars 4,200,000.0 from Central Technologies, 2,400,000.0 from our distribution partner DNH, dollars 2,200,000.0 from Trucks, 2,200,000.0 of orders from Digital Age Technologies and $2,000,000 from data projections.

Whilst many of our largest orders were from U. S. Partners, it is worth noting that we took over $21,000,000 of orders from partners outside of The U. S, predominantly in EMEA. This highlights the quality and diversity of our customer base, which will be crucial as we develop and expand our business over the next few years.

On the April 26, two of our largest partners, Keene and Trox merged to become one organization. This is a very significant opportunity for Boxlight because Tierney currently has exclusive rights to sell CleverTouch in forty nine of the 50 states in The US. We are discussing the extension of our CleverTouch exclusivity contract to include trucks across 49 states and Canada. This means that once an agreement is reached, the number of salespeople who are actively selling CleverTouch in The US will increase substantially from about 40 heads to over 200 heads. We expect the agreement to be finalized in the next few weeks.

This automatically gives CleverTouch true sales presence across The US and Canada. In terms of end users, we had another quarter of fantastic wins across the globe. One notable win was the Ministry of Defense in The UK. The MOD purchased more than $1,400,000 of CleverTouch screens to use throughout their bases in The UK. They selected our screens for two main reasons.

Firstly, the ability to totally lock down our screens and use them in a very secure environment. And secondly, because of the flexibility of the LINK software, allowing the MOD to get the maximum benefit from the CleverTouch screens. The Americas region for Boxlight had several key wins in 2021. Brighton School District in Michigan purchased more than $1,100,000 in Boxlight product, including three hundred and thirty eighty six inch panels and our MimioClarity audio system for each classroom. Our key reseller in Tennessee, Central Technologies, continues to do well throughout the state, purchasing more than $2,600,000 in Boxlight products in Q1, including a major win in Warren County.

Our strategic partnership with Samsung has continued to progress this year. We recently received our first substantial order from our Mimio Connect software from Samsung US for approximately $1,000,000. Furthermore, Samsung has agreed that every interactive panel that they sell into The US education customers will automatically include a Mimio Connect license. We are also in discussions with Samsung UK and other parts of EMEA about similar opportunities for our Mimio Connect solution and hope to announce further wins shortly. In addition to the software sales, we are also committed to selling high volumes of Samsung hardware under our partnership agreement, including non interactive displays and look forward to providing additional updates later this year.

In summary, Q1 was a very strong quarter in terms of order intake and revenue, and our solutions are getting a lot of traction in the market. We continue to develop our key partnerships and alliances across the globe, and I look forward to another record quarter in Q2. With that, I will now turn the call over to our CFO, Patrick Foley.

Speaker 3

Thanks, Mark, and good afternoon, everyone. To further expand on what you've already heard from Michael and Mark, I would like to add a few figures to provide some context to Boxlight's international operations. So revenue by country and region. Total revenue in q one was $33,400,000 of which EMEA was 54% or $18,100,000 of which The UK represented 56%. The US was 42% or $13,900,000.

The rest of the world, 4%, $1,400,000, which was mainly Australia and South Africa. In terms of customers, the top 10 customers represent approximately 47% of total sales in q one, with the single largest customer at 8%. And these are based across a number of markets, namely US, UK, Denmark, and France. Nearly two thirds of total sales are covered by the top 20 customers, approximately 64%. This is pretty similar to our q four twenty twenty.

For our sales, product mix, and gross margin, in q one, displays remained the largest proportion of total revenues at 78%. These were largely sales of interactive flat panel displays with related accessories generating a further 9% and the balance coming from software, services, and STEM solutions. Adjusted gross margin for the quarter was 25.6%. The IFPD margin was approximately 26%, which would have been slightly higher. However, as reported by Michael earlier, increased global shipping costs where we are seeing a Forex normal rate have reduced margin by up to four percentage points.

We anticipate our higher costs will remain for the next two quarters. Screen sizes and their splits in q one twenty twenty one within the education sector, 77% of all interactive displays were 75 inch and 86 inch panels, which follows the trend we are seeing with larger screen formats. I will now review our first quarter results. Our financial results for the three months ended 03/31/2021 were as follows. Revenues for the three months ended 03/31/2021 were $33,400,000 as compared to $5,700,000 for the three months ended 03/31/2020, resulting in a 484% increase due primarily to the acquisition of Sahara in September 2020.

Gross profit for the three months ended 03/31/2021 was $8,600,000 as compared to $1,600,000 for the three months ended 03/31/2020. The gross profit margin for the three months ended 03/31/2021 was 25.6% and the adjusted net effect of acquisition related purchase accounting, the margin was 28% as compared to 27.9% gross margin as adjusted and reported for the three months ended 03/31/2020. Gross margins have been adversely impacted by up to four percentage points due to increased freight and customs cost caused by supply chain challenges associated with the effects of the COVID nineteen pandemic. Total operating expenses for the three months ended 03/31/2021 were $10,600,000 as compared to $4,300,000 for the three months ended 03/31/2020. The increase primarily resulted from additional overhead costs associated with the acquired Sahara operations in September 2020.

Other income expense for the three months ended 03/31/2021 was net expense of $3,100,000 as compared to net other income of $700,000 for the three months ended 03/31/2020. The increase in other expense was due to $600,000 of increased interest expense associated with increased borrowings, 1,900,000.0 of losses recognized on the settlement of certain debt obligations that were exchanged for common shares, Fewer gains were recognized on the settlement of accounts payable, which were $1,100,000 lower year on year, and $300,000 of additional losses that were recognized in 2021 upon the remeasurement of certain derivative liabilities associated with common stock warrants. The company reported a net loss of $5,200,000 for the three months ended 03/31/2021 as compared to a net loss of $2,000,000 for the three months ended 03/31/2020. The net loss attributable to common shareholders was $5,500,000 and $2,000,000 for the three months ended March 2020 respectively, after deducting fixed dividends to the Series B preferred shareholders. Total comprehensive loss was $5,400,000 and $2,100,000 for the three months ended March 2020, reflecting the cumulative effect of foreign currency translation adjustments on consolidation, with the net effect in the quarter of $300,000 loss and $100,000 loss for the three months ended 03/31/2021, and 2020 respectively.

The EPS loss for the three months ended 03/31/2021 was $0.09 loss per basic and diluted share compared to $0.16 loss per basic and diluted share for the three months ended 03/31/2020. The EBITDA loss for the three months ended 03/31/2021 was $2,400,000 as compared to $1,300,000 loss EBITDA loss for the three months ended 03/31/2020. Adjusted EBITDA for the three months ended 03/31/2021 was $1,600,000 as compared to a loss of $700,000 for the three months ended 03/31/2020. Adjustments to EBITDA include stock based compensation expense, gains and losses recognized upon the settlement of certain debt instruments, gains and losses from the re measurement of derivative liabilities, and the effect of purchase accounting adjustments in connection with acquisitions. At 03/31/2021, Boxlight had $10,000,000 in cash and cash equivalents, dollars 21,800,000.0 in working capital, $139,700,000 in total assets, $20,600,000 of debt, $47,400,000 in stockholders' equity, 56,800,000.0 common shares issued and outstanding, and 3,100,000.0 preferred shares issued and outstanding.

And with that, we'll open up the call for questions.

Speaker 0

And it looks like we have a question from Brian Kinstlinger. Your line is open. Please go ahead.

Speaker 4

Hi, everyone. Thanks for taking my questions. This is Jacob on for Brian. Clearly, North American operations are benefiting from the federal funds. Can you talk about your international positioning and what are the growth rates like and how much faster do you think you can grow?

Speaker 1

Yes, for the question. This is Michael. I'll say a couple of things and then Pat or Mark feel free to jump in. When we look at the globe, The U. S.

Is absolutely our number one growth market. We're seeing more spending happen in The U. S. Than we are in other countries. And so we have a tremendous focus on The U.

S. But there are other countries around the world, including throughout Europe, that are also seeing high growth. Germany would be one that we talk a lot about. You know, other areas may be a little bit more static. But in general, when you look at the globe as a whole minus China, which is the way that we look at the opportunity, and we're seeing double digit growth.

And that's true in The U. S. And that's true in other countries and aggregate around the world. And so there's absolutely opportunity all over. Now as far as federal funding, you know, there's substantially more federal funding in The U.

S. That's been applied. But there are other programs internationally as well where we're seeing federal funds as well available for school systems in other countries. But again, I would say absolutely US is number one market. Beyond that, it would be Germany and certain other territories throughout Europe and then other territories around the world.

Speaker 2

Yeah. I mean, to put a bit more color on that, in Q1, we had in Germany specifically, had 73% year on year growth in revenue, okay? So significant growth rates.

Speaker 4

Given the timing of some of the federal funding package in The U. S. And talked about maybe in some other countries around the world, one being recent. Do you expect the seasonality be more pronounced this year, meaning in the second half of the year might be more might account for a significantly higher percentage of annual revenue?

Speaker 1

That's a good question. Yeah, I think we're still figuring that out. You know, if the federal funding that's being made available, if that's spent, you know, more quickly, then I think absolutely that will be the case. But I think it's yet to be seen how quickly some of these funds will be spent. I will say that we are seeing spending now from the CARES Act money.

And you'll remember the CARES Act went in play in March. And we're receiving orders now where schools a year later are spending that CARES Act money. That CARES Act money, that was part of a $2,000,000,000,000 CARES Act with about $31,000,000,000 of allocated education. You'll remember that in December, there was another COVID relief act that hit. That was about $82,000,000,000 for education.

And then in March, the most recent stimulus package, that was $170,000,000,000 for education. So we're definitely gonna see a lot more money flowing in. I would anticipate the vast majority of that is gonna lag into next year. But we do expect to have with seasonality a stronger second half of the year than first half of the year, that's for certain.

Speaker 2

Okay.

Speaker 4

One more and I'll hop back in the queue if I have any more. Can you talk about the supply chain? Is there any quantifiable impact? I think you mentioned about 4% on gross margin, but any impact that you're seeing on revenue and orders and then continuing gross margin and also on building inventory. Is there any more color you could give on that and how long you might expect this to last?

Speaker 1

Yes, so let me tackle the latter part of the question and I'll cover the rest. So as far as timing, you know, it's uncertain. Know, it's a global problem as we mentioned in our remarks. Affecting, you know, those in our industry as well as many outside of our industry. Anybody that utilizes chips and components for technology and even metals and plastics, we're seeing potential shortages of.

So I will say that we're managing it the best we can. We're ordering out way in advance. We mentioned in the remarks that we've ordered out through the end of the year, so that's well beyond where we normally would order out. We're seeing lead times of four to six months and so we're planning accordingly. It has not affected us in a major way to this point in time in deliveries.

There have been some slippages of deliveries, but generally we're meeting our delivery timeframes. We believe that's still going to happen in Q2 that we'll meet our timeframes. There is a little more uncertainty around Q3, Q4. But like I said, we're doing everything we can to manage that. As far as impact on orders, we're not seeing an impact on orders.

We're seeing a tremendous amount of orders. And I think if we're better off than competition, we'll be putting an advantage in an advantageous position because I think we may be receiving some orders that maybe could have gone somewhere else. And then as far as financial impact, you heard the 4%. That's related to shipping costs. Are seeing also additional cost of goods in the cost of our technologies and that's in the way of increases in prices on components and increases in the bill materials from our manufacturers.

But we're trying to offset that the best we can. In many cases, we've been able to increase prices to our customers and that helps offset that and negotiate the best we can with our manufacturers. And you can see in Q1 our gross profit when you adjust for those purchase accounting adjustments, were 28 points which we're happy with, that 28% gross profit margin. That's compared to you'll remember in Q4, we had about a 26.5% comparable gross profit margin. So we're trending in the right direction.

We think as some of these concerns around increase in costs around freight and materials as those start to normalize, we ought to gravitate more towards around that 30 points gross profit margin.

Speaker 3

Michael, I would just add to that also the point in terms of supply chain and in terms of what we're doing in terms of pre planning. So in terms of our working capital, when you look on the balance sheet, you'll see the shifts actually moving into our increased inventory to actually being prepared for that. We're also, as Michael mentioned, we have kind of like a lead time around four to six months. So we are actually pre planning against that and actually stocking accordingly.

Speaker 4

Great. Thanks so much, guys.

Speaker 1

Yes. Thank you for the questions.

Speaker 0

We'll take our next question from Jack Vander Aiz. Your line is open. Please go ahead.

Speaker 5

Okay, great. Hey, Michael. Hey, team. Solid results and strong guidance. A couple of questions.

I'll start with Michael. So in your recent shareholder letter, you indicated an expectation for at least $40,000,000 of customer orders and you raised your revenue to over at least $31,000,000 of revenue. But clearly based on today's results, comfortably exceeded both of those targets, over $47,000,000 of orders and over $33,000,000 of revenue. Can you just maybe speak to some of the drivers that led to that positive delta or upside surprise?

Speaker 1

Yes. So a couple of things. One, we are seeing increased demand even beyond our internal targets in the industry and that's a function of additional focus on technology buying. Some of that is because a lot of classrooms are going back to traditional or hybrid learning. That puts more focus on it.

There's also a lot more political focus on technology in the classroom. But then also there's an immense need for educators and students to have technology to be able to return to learn and bridge learning gap and be effective. So that's part of it, just the general industry. On top of that, you heard us talk about federal funding. That also is driving additional demand knowing that these federal funds are coming and those funds are expected to be utilized towards these technologies that we're providing.

And then I would add on top of that, we're a healthier company now than we've been in the past. We had some challenges if you go back a few quarters. You know Jack as you followed us for quite some time. And so just by nature of being a healthier company, I believe there's a lot more confidence from end users. There's a lot more confidence from our partners.

We sell through reseller partners, and so a lot of those partners now believe in us, and they're standardizing more on our solutions. And then also we have a steady stream of supply of solutions so that provides, you know, again, you know, more confidence from the partners. And then it comes down to just, you know, the solutions themselves. We have the best solutions in the industry. We're telling that story.

We're out there. We're sharing that. We're investing more in our sales team, and all of that is generating results. I would say, in general, the uptick in additional orders, the uptick in sales is a result of those mix that mix of items. Now from when we provided guidance to the sales figures coming in higher, now that came down to us reconciling towards the end of the quarter and figuring out what those numbers would be and we were trying to be conservative when we put the numbers out there.

And I was pleasantly surprised that we came in well above our initial numbers we were looking at. So that was just a nice surprise. But we knew that we were in a good place with the guidance of the $31,000,000 in revenue and greater than $40,000,000 in orders.

Speaker 2

And, Michael, I'll just put a bit more color on that. You know, we're winning. We are winning. You know, wherever we're playing, we're winning. You know, our team we're we're really investing heavily in the sales team.

They're being heavily trained. We know we got the best products. Okay. We're winning. And, you know, we got the sale in our wins or the wins in our sales, and, know, it's we're we're getting a lot of good results.

So, you know, we're winning a lot of good orders. Yeah.

Speaker 5

Got it. Fantastic. I appreciate the deep color there. That's helpful. And then just if I turn to speaking of federal funding opportunity and there's only a few questions on this already, but just many of your districts are being, you know, are actively in discussions or your channel partners and your district partners, how many of them are you actually working with currently or have ongoing communications?

There's an actual real immediate or pending expected opportunity there to access this funding in all of your districts? You have so many school districts and classrooms that you're already penetrated and all across the country. Is this happening universally across all your different territories and districts? Or is it kind of off and on here or spotty, I should say, and then ramping up to it?

Speaker 2

Michael, do you want to take that? I mean, it's everywhere, right? It's consistent, it's everywhere.

Speaker 1

That's right. Yes, so obviously in The U. Every district in The US is getting allocation of funds, so they're talking about it. I would say the majority of those districts have minimal experience in knowing how to access those funds, so they're scrambling to do that. And we provide a lot of resources around that.

We have a team that helps those districts access funds and understand how to utilize those funds. We put out a new guide just a couple weeks ago and that's a detailed guide of school districts. They can read that guide and understand, you know, more about utilization of the funds and accessing the funds. But we're happy also to provide additional resources beyond that. Outside of The U.

S. And other countries where there's funds allocated, same thing. You know, everybody knows that the funds are out there and looking to access those funds.

Speaker 2

Just a bit more info. Sorry, Jack. So the other key thing to look at in The US is the penetration rate. So the penetration rate of IPDs in The US is actually significantly lower than EMEA. Okay?

That means the opportunity for us is significantly greater in The U. S. So that's why we're expecting such significant growth rates from The U. S. Side of our business.

Speaker 5

Yes, I'm glad you brought that up because that's what I was going to follow-up on is just in terms of the overall opportunity. How many I imagine that there's a lot of school districts maybe they have they haven't been renovated or, you know, have newer technology implemented yet into their classrooms. I'm expecting that this could be an opportunity for those districts to actually, you know, get some federal funding to actually make that happen, which does this open the door then to a lot of new customers coming to you now, a lot of other districts that didn't already have an interactive technology already built into their classrooms that you weren't already helping or servicing in any kind of way, but now because of federal funding, they're coming to you and knocking on your door?

Speaker 1

Yes, so there's absolutely some of that. And Jack, I would add too, there are a lot of districts who were planning on technology refreshes or new technologies in their district but they didn't have the funds allocated. And so now that they have this new funding coming, they're accelerating some of those decisions. But I think, you know, to Mark's point, you know, a couple of thoughts I think are important. So one is definitely districts that don't have the technologies we sell, it's an opportunity for us to sell in.

Also there's large districts that are doing refreshes of technologies they put in play, you know, could have been five or even ten years ago. And and and and the solutions we're selling with interactive flat panels, various hardware solutions, most of those have about a five to seven year life cycle. And so when you install these solutions five to seven years later, we're doing a major refresh. If you look at some of the largest districts where we've been selling, like San Diego we've talked about, or Montgomery County, or Clayton County in Georgia, or Beaufort County, South Carolina, those were actually refreshes of our competitors' technologies, right, of interactive whiteboards or other interactive flat panels in those districts and they're replacing that old technology with our newer interactive flat panels which are four ks high definition with app stores and other technologies that we're including. I mean, just I mean, on average, every single classroom in The US effectively has $75,000 spent.

And it's like, what are

Speaker 2

they gonna spend that on? And technology is pretty much high up there. We know we've got a lot of the technical solutions for those classrooms. So we think we're well positioned.

Speaker 5

Got it. No. That's helpful, guys. And then just another question on if I shift to the second quarter guidance, very strong guidance is ahead of my expectations. For revenue of 39,000,000 and at least $1,000,000 of adjusted EBITDA.

Just wondering about that adjusted EBITDA number of at least $1,000,000 How conservative or how much wiggle room is built into that just given your comments around the supply shortage of components? Is there is that like risk adjusted for that? And maybe some gross margin hiccups? Just how much cushion are you baking into there? Because given you just did over $1,600,000 of EBITDA basically for the first quarter on less revenue.

Just trying to figure out if that's a conservative target or not.

Speaker 1

Two reasons for that, Jack. So one is you're absolutely right, it's risk adjusted for potentially some higher costs around our inventories we bring it in as well as delivery of those goods. But then also, we've been focused on broadening our sales team and increasing some of our marketing spend and we've been absolutely focused on taking market share and that gives us a little buffer as well for some of the expansion, a little bit of expansion on our OpEx as well. So it's a combination of those two. We say at least, right, so there's definitely some room to be much higher than that.

And we expect we will be higher than that, but that $1,000,000 was a conservative estimate to provide.

Speaker 5

Okay. And then maybe just lastly, in terms of your geographical focus, you've been gaining market shares. Last quarter, you did mention that you took number one market share in Australia. Just maybe an update around are you making any noticeable or material headwinds? It's only been a couple of months, maybe a month or two since we last spoke, but what's the next market share that you see yourself climbing the ladder up the quickest in terms of geographical region?

Speaker 2

So do want me to take this Michael or do you want

Speaker 1

to take it? Michael go ahead, Mark.

Speaker 2

Michael Yes. So well, in terms of that data, in terms, that report, the next one comes out in about six weeks' time. So we'll have that shortly, and then we'll be able to share, you know, where we are in terms of our actual statistics and and market share. But in terms of where I see the growth and and where we're effectively gonna take market, I think, The US, I think Germany, I think The UK were already very strong. I think we could potentially go up to second position.

I I you know, I look I'm looking at the volumes that we're doing, the actual quantities that we take whether we're actually selling in IPDs, and it's it's really quite staggering, you know, the growth that we're doing in the volume. So I think really for us, the key targets are taking market share in The US, taking market share in Germany, and then other parts of Northern Europe. So that's probably the best guide we can give.

Speaker 5

That's helpful. And actually, I do have one more question, I apologize. On the Samsung arrangement or partnership, it seems like it's starting to finally kick in a little bit here. Wondering how your second quarter revenue guidance contemplates contribution from Samsung in initiator form. Is it meaningful?

And then also do you still expect Samsung to really materially ramp into a real revenue contributor during the back half of this year?

Speaker 2

Do you want to lead that Michael or do want to mislead?

Speaker 1

Yes, I'll say just a couple of things and I'll have you fill in the gaps. The answer is we have not baked in substantial sales at this point into our Q2 of Samsung because we believe the ramping is going be in the latter part of the year. And we've only, of course, guided to Q2. We do think it can start to be significant, we said that in our remarks. A nice movement in the right direction was the announcement we made in our remarks of $1,000,000 in licensing of selling our MimioConnect and other solutions to Samsung and their agreement that every interactive flat panel sold in education, every Samsung interactive flat panel sold in education in The US will be accompanied with our MimioConnect software.

So that's a movement in the right direction. Now the recognition of that revenue, we still need to model that, but it's gonna be over a period of time because those MimioConnect licenses are three year licenses. And so we'll have to look at how that revenue is recognized. But that was nice moving to bring in that million dollars of orders of that software platform and our training and some other software and content that we're providing. So but again, I think come next quarter, we should have a better grasp on where we are with Samsung and be able to provide more updates.

Speaker 5

Fantastic. It sounds like there's a lot of it's just it's a conservative embedded contribution from Samsung in that guide, which is a strong second quarter revenue guide. That's great to hear. I mean, there's probably room for upside down the road here as you progress. That's it for me guys.

Thank you.

Speaker 1

Yes. Thank you, Jack.

Speaker 0

Our next question comes from Chad Bergen. Your line is open. Please go ahead.

Speaker 6

Hi, good afternoon and congratulations on the really good quarter for Voxelite. Actually just a quick comment mainly because I work with federal grants. I just really, really appreciate the approach that you all are taking in terms of setting up kind of an education and assistance center for school districts to take advantage of the federal funding. I know in my line of work, the capacity to apply for that seems to be one of the biggest bottlenecks. And so my first question kind of relates to that.

Given that I think you've deployed a really good strategy there. Are you seeing kind of an acceleration in in kind of request for help and demand and that type of thing? Because I I think I've recently heard that only maybe about 3% to 5% of that funding for school districts have already been spent. So it seems like there's just a huge opportunity there.

Speaker 1

Yeah, Chad, that's a good question. So the answer is yes. We're a significant ramp in questions and requests for assistance in accessing funding. Absolutely, the vast majority of the federal funding has not been spent or accessed. Even of the CARES Act, just a few weeks ago, saw an update to a report that showed that maybe as much as maybe half had been spent, so there's still a substantial amount, or allocated, so there's still a substantial amount of even that first tranche of CARES Act money that is yet to be allocated.

So the answer is yes, we're seeing that ramp, and we feel like us putting out the guide that we produced just a couple of weeks ago and having internal resources that the timing is right to where we're going to be a resource as more and more questions ramp.

Speaker 6

Great, great. Well, and kind of tied to that maybe, one of the things that caught my ear was the increase that you're going to have in the sales team, think increasing from around 40 to 200 with at least, I think here in The States. And I was wondering if you could just provide maybe a little more color on that from the standpoint of are you at the point where you're kind of seeing so much demand that you're going to have are you expecting kind of a huge material impact by expanding that sales team in that area? Was just wondering if you'd comment on that.

Speaker 2

Yes. Let me take that first, Michael. So yes, just to make that clear. So currently, we have and the these are external. These are salespeople that are partners who can sell our CleverTouch brand.

Okay? So at the moment, we only have about 40, people, salespeople that are partners who are able to sell CleverTouch because we have a very, very tight and controlled channel because we have exclusivity with T and E. Because of the merger between T and E and Trucks, Trucks have significantly more. They have about a 160 salespeople, and we are in discussions about that exclusivity agreement and extending that to Trucks now that they've merged with T and E. And therefore, the amount of, external salespeople that are partners who are able to sell CleverTouch will increase significantly from about 40 to 200.

So it's not us employing those people. Those are salespeople already employed by our partners, but the number of people who are now eligible and able to sell CleverTouch will increase by about five x. So that's the first part of the question. The second part is, is there the demand there? Absolutely, is.

100%.

Speaker 1

Chad, I'd add just to clarify that we sell through channel partners, value added reseller partners. So we don't sell direct in most cases to the end users. And we have over 1,000 of those partners across the globe. We have about 300 of those partners in The U. S, for example, and the majority of the remainder are throughout Europe.

But those partners have, you know, in aggregate thousands of reps. You know, you're hearing about Trucks Journey, but there's thousands of reps out there that support Boxlight in selling our solutions and represent our brand. Internally, we have dozens of salespeople to help support them, but we are selling through these reseller channel partners. Now of those partners, you heard Pat mention in his remarks that the top 20 of those partners make up just over 60% of our total sales. So we do have some very significant partners like the Throx and Tyrannies of the world.

But we do have a substantial number of partners beyond that that do order from us and sell our solutions.

Speaker 6

Okay, great. Thank you. And my final question is focuses on I was wondering if you might comment a little bit on what you're seeing in terms of forward looking in terms of the software solutions. You've commented a couple of times I think on the MimioConnect licensing and those kinds of things. And my assumption, of course, is that software solutions are going to be probably a higher margin product than let's say hardware.

And what are you seeing, I think, in terms of the horizon for kind of the software aspect, just beyond the hardware? Thank you.

Speaker 1

Yes. So Chad, the way we think of our solutions is we look at different product categories. So it starts with displays. Displays represent, as we've mentioned, over 70% of our total sales. So that's our largest category.

But those are largely interactive flat panel displays. Then on top of that, we sell accessories. Accessories include mounts and stands for displays but also our audio solution and document cameras. We have tablets for the teacher. We have student response devices.

Those all fit into accessories. And then we sell software. That's a category. We break out STEM. STEM standing for science, technology, engineering and math.

That includes a robotic solution, a three d printing solution. We have a science device that we sell. And then lastly, have a professional services division that provides training and professional development and we charge for that and we provide that in some cases district wide with large contracts. In other cases we're providing online self paced or variations in between. You really have five product categories that we look at.

Now today again, the largest category is interactive displays. But as we march into the future, part of our aim and vision for the company is to be able to increase those other categories much faster than the rate at which interactive displays are growing so that our product mix is less heavily weighted toward displays. So I'm giving you a roundabout answer that yes, absolutely, we think that soft will be a much higher percentage over total sales as will be services and accessories and STEM solutions. And all of those are much higher margin. You know, is, you asked about software margin and that's almost entirely margin for us up in gross profit margin because most of that cost is actually captured down in our operating expenses.

Now internally we evaluate a little differently, but if you're looking from an external standpoint, yes, that's going be very, very high margin. But then also if you look at accessories, most of those are 40% or 50% plus margin. Our professional services is 40% plus margin. Our STEM solutions largely are as much as 50 plus percent margin. And so again as a company we're focusing on improving the product mix, improving our gross profit margins and software is absolutely a large part of that strategy.

Speaker 6

Thank you. And I actually appreciate the more comprehensive answer to that. Well, that's all the questions I had. And again, congratulations on a Thank great you.

Speaker 1

Thank you, Chen.

Speaker 0

And it appears that we have no further questions at this time. I will now turn the program back over to Michael Pope.

Speaker 1

Thank you everyone for your support and for joining us today on our first quarter twenty twenty one conference call. We look forward to speaking to you again in August when we report our second quarter twenty twenty one results.

Speaker 0

This does conclude today's program. Thank you for your participation. You may disconnect.