Siyata Mobile - Q4 2023

Transcript

Speaker 4

Good morning, ladies and gentlemen, and welcome to the Siyata Mobile Q4 2023 and full year 2023 earnings call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during the call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, April ninth, two thousand twenty-four. I would now like to turn the conference over to Glenn Kennedy, Vice President of International Sales. Please go ahead.

Speaker 1

Thank you for joining the Siyata Mobile fourth quarter and full year 2023 earnings call. Today, I'm joined by our CEO, Marc Seelenfreund, and we will be available for questions at the end of the presentation. During this call, management will make express and implied forward-looking statements within the Private Securities Litigation Reform Act of 1995 and other U.S. federal securities laws. These forward-looking statements include, but are not limited to, those statements regarding future product offerings, the belief that we are on the path for strong organic growth, the goal to deliver strong year-over-year revenue growth and reach profitability in the coming quarters, and the timing and sale of our rugged handsets to North American and international carriers. Such forward-looking statements are based on the company's current expectations and assumptions regarding its business, the economy, and other future conditions.

Because forward-looking statements relate to the future, they are not statements of historical fact and are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. The company's actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. The company cannot guarantee future results, levels of activity, performance, or achievements. The forward-looking statements contained in this presentation are subject to other risks and uncertainties, including those discussed in the Risk Factors section and elsewhere in the company's annual report on Form 20-F for the year ended December 31, 2023, filed with the Securities and Exchange Commission. Now, I'd like to turn the call over to Marc.

Speaker 2

Thank you, Glenn. Good morning, and thank you for joining the call. For the fourth quarter of 2023, ended December 31, revenues were $1.9 million compared to $2.1 million in Q4 2022, due mainly to increased sales of our mission-critical SD7 handset and accessories, offset by decreased booster sales for the same period. Adoption of our critical communication devices is expanding both in the U.S. and in international markets in multiple verticals, including public safety, education, healthcare, security, hospitality, and more. Given our performance throughout the year and our expanding sales pipeline, we are increasingly optimistic that strong sales growth momentum will continue throughout 2024. Revenue from the U.S. was 67% of total revenue for the year, compared to 59% in 2022.

Rugged device sales in 2023 were $6 million versus $3.9 million in 2022, an increase of approximately $2.1 million in the year due to an increase in sales of the SD7 handset and accessories. Gross margin percentage for Q4 2023 was 46.2% versus 8.1% in Q4 2022. Gross margin dollars increased from $170,000 to $900,000, a $700,000 positive variance, which is a 410% increase in gross margin dollars. SG&A expenses were $3 million in Q4 2023 versus $4 million in Q4 2022, a positive variance of $1 million.

Adjusted EBITDA for Q4 2023 was -$2.3 million, compared to -$5 million in Q4 2022, which was a positive variance of $2.7 million. Working capital as of December 31, 2023, was just under $1.3 million versus just over $1.6 million as of December 31, 2022, a $300,000 decrease in working capital. For the full year ended December 31, 2023, total revenue was $8.2 million, compared to $6.5 million in 2022, which is a positive variance of $1.7 million or a 27% increase.

Gross margin dollars were $2.7 million in 2023, compared to $1.4 million in 2022, which is a positive variance to $1.3 million, a 91% increase. Finally, the gross margin percentage was 32.3% in 2023, compared to 21.4% in 2022, a significant improvement of 10.8 percentage points. Turning over to significant business highlights, we are pleased to report that in the United States, which is our largest geographic market, Siyata is now launched with our flagship SD7 handset at the four largest U.S. carriers, namely AT&T, including FirstNet, as well as Verizon, T-Mobile, and US Cellular. With two of these carriers, we've achieved what is called Spot Status, which means that the carrier supports the sell-through with subsidies and aggressive pricing options for its customers.

In addition, we have recently been notified that we will be getting this spot status with a third major U.S. wireless carrier as well in Q2. Less than a month ago, US Cellular released a PR that it has launched the SD7 handset with its push-to-talk, or PTT, service, and they called out how the Siyata handset enables two-way radio customers to seamlessly transition to its new PTT over cellular service. The SD7 handset is the only direct radio replacement device offered by U.S. wireless carriers. Some wireless carriers and customers are calling the SD7 handset a cellular radio because it looks, feels, and functions like a traditional two-way radio, but it works on a nationwide cellular network, providing much broader range than two-way radios, and it is also much more cost-effective than two-way radios used by first responders and large enterprise customers.

Siyata is selling through the wireless carriers to a growing list of vertical markets, and Siyata is selectively expanding its distribution internationally, where we sell in Canada, Europe, Australia, and the Middle East. Less than 2 weeks ago, we announced a new large-scale logistics reseller for Siyata in the Middle East. Siyata is also developing an exciting and robust 5G rugged handset portfolio based on feedback from our end customers and our wireless carrier partners, which we will be announcing in the coming months. In addition, in June of 2023, we announced a new product called Siyata Real-Time View, together with a major order internationally. This is an innovative real-time camera system installed in first responder and enterprise vehicles to provide better fleet management and control.

In Q3 of 2023, we installed our first units and ambulances at a leading international EMS customer, and the system provided outstanding results in real-time field cases. We continue to roll out this product to additional ambulances and EMS vehicles and expect this to be a great add-on to our product portfolio in 2024 and beyond. Based on our strength and position with the wireless carriers, we have seen growing demand for all of our PTT products, as shown by our growing sales funnel of opportunities. Our goal is to grow our revenue aggressively in 2024 and to reach breakeven status on a quarterly basis in the coming quarters. Now I would like to pass the line back to Glenn, who will discuss our sales activities, some market dynamics that are benefiting our business, and an update on our product categories.

Speaker 1

Thank you, Marc. Marc just mentioned our sales funnel of opportunities. This is a list of over 50,000 units of SD7 handset potential sales for multiple school districts, police forces, hospitals, security companies, utilities, and more, who are in various stages of trials towards purchasing Siyata SD7 handsets. We know we're not going to win all of these opportunities. However, we're confident that we will win a percentage of these. Plus, we will continue to acquire new potential customers throughout 2024. We are also encouraged by the fact that the number of entries in our sales funnel is growing and the size of the multiple large-scale opportunities is also growing. Currently, we are conducting large-scale trials with a national airline, a global sporting event, several major school districts, leading transit companies, and a statewide government opportunity.

One of our key wireless carrier partners, FirstNet, which is owned by AT&T, announced that as of December 31, 2023, it now supports approximately 5.5 million push-to-talk over cellular connections to 27,500 public safety agencies, a gain of about 500 agencies during the fourth quarter of 2023 from the figures they released three months earlier. During the fourth quarter of 2023, FirstNet added approximately 260,000 push-to-talk over cellular connections. Siyata works closely with FirstNet, and their growth is further evidence that US first responder customers are moving towards push-to-talk over cellular solutions. In a rugged handset product category, we are focused on growing sales of our SD7 PTT handset that supports mission-critical, push-to-talk to North American and international wireless carriers.

We displayed this handset at several trade shows during and after the quarter, including in March 2024 at the International Wireless Communications Expo, or IWCE for short, in Orlando, Florida, and at multiple regional shows in the U.S. in partnership with FirstNet and Verizon. Today, we're active with all major North American carriers, as Marc mentioned, and also with Telstra in Australia and KPN in the Netherlands, as well as with multiple dealers and distributors in the U.S. and international markets. Our objective remains to expand our launch with additional international carriers and with additional PTT application companies in future. We're also building a recurring revenue channel by partnering with selected application providers, who will share the monthly subscription revenue when we sell their application on our devices to our customers.

In our in-vehicle devices category, we continue to sell through our UV350 in-vehicle device with customers in North America and internationally. We announced an order during Q1 of 2024 of 1,000 units of UV350 for an international EMS customer. We are experiencing increasing demand for our unique VK7 vehicle kit, which is a partner product to our SD7 handset. Several customers in the U.S., including some with yellow school buses, transit vehicles, and snowplows, are installing VK7 vehicle kits into their vehicles so that the SD7 handset can be easily used in the vehicle kit while their staff are in their vehicles. Also in our in-vehicle product category in 2023, we received our first order for $1.2 million for Siyata Real-Time View, an integrated advanced video monitoring system for emergency management service or EMS providers in their fleet vehicles.

Mark mentioned that we began to install the system into ambulances and first responder vehicles during the third quarter of 2023, and we look forward to more sales opportunities for this solution in 2024. Finally, in our cellular booster product category, we saw a steady demand for cellular boosters throughout North America. I will now hand the line back to Mark for closing remarks.

Speaker 2

Thanks, Glenn. Overall, we are excited to see a growing number of customers choose to transition from legacy LMR devices to our Siyata PTT handsets and accessories. We are pleased that this is happening across a wide variety of vertical industries and across multiple geographic markets. We believe that the core fundamentals are in place to grow our business, both in North America and in international markets. Our goal remains to ramp up sales, to reach breakeven, and then profitability as soon as possible, and this focus is shared by our entire board and management team. We have filed our 2023 financial results with the SEC on a Form 20-F and urge our listeners to access them from the SEC's website. Search for Siyata Mobile. That concludes our formal remarks. With that, operator, kindly open the call to questions. Thank you.

Speaker 4

Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Your first question for today is coming from Neil Cataldi at Blueprint Capital Management.

Speaker 3

Hey, guys, question for you about the recurring revenue channel you mentioned. I was wondering if you could expand on that a little bit more. What percentage of revenue is it today? How might it scale over time? Any notable difference in margins on that? Thank you.

Speaker 1

Yeah, Neil, it's Glenn here. Thanks for the question. Our recurring revenue channel is, it's small today. I would say it's not yet material financially. However, it's important for us, and we are growing it. The way it essentially works is, and the best way I can describe it is using an example. There's a company that offers a software application. They're called CrisisGo, and it's especially relevant for schools, the education market, K to 12 schools.

Specifically, their solution, their application controls what happens when the SOS emergency button on our device is pressed, and through their application, they're able to have the right people notified of an emergency situation in the classroom or somewhere in the school, and they're able to follow up through our two-way radio capabilities, our push-to-talk capabilities, and they're even able to notify local authorities. So when we co-sell that solution, our hardware with their software application, there's a subscription fee that the customer pays to CrisisGo, and a portion of that revenue will come to Siyata. So that's one example. It's not the only example, but that's one example of application partnerships that we're doing.

And so over time, we expect that to grow to become material, and we'll actually, you know, eventually, down the road, call it out in terms of its percentage. But it's very important for us to develop that channel for us.

Speaker 3

Great, thanks. Appreciate the call here.

Speaker 4

As a reminder, if you would like to ask a question, please press star one. Your next question for today is from Chris Zebra, a private investor. Chris, your line is live.

Speaker 0

Good morning. You had mentioned the different vertical markets and the use cases for your products. In which vertical markets are you seeing the most current success, and which do you see the most upside potential, and why?

Speaker 2

I'll take that. This is Marc. Thanks for the question, Chris. So, you know, as we mentioned on the call, we have a lot of different verticals that we're going after, construction, first responders, utilities. But probably the largest vertical that we're seeing right now is actually schools. We've sold into, I want to say, well over 20 school districts until now, and in our funnel, I want to say at least 20% are various school districts across the United States. It's sort of a greenfield market for us because there were not really radios there before, and this is a very cost-effective way to give teachers, security guards and, you know, people that are working in the schools, a communication tool that they can actually use in time of emergency and also ongoing.

So we think that that's gonna be a very big vertical for us. There's over 3 million teachers in the United States. There's around 500,000 yellow school buses, and we're selling both to yellow school buses and to teachers. So we actually think that that's gonna be the largest vertical for us going forward. Having said that, we have many, many other verticals that we're working on and that we're selling into. But if I have to pick out one specific vertical, I would say it would be the schools. Education.

Speaker 0

Sounds good. Has college campuses been something that's been looked into as well?

Speaker 2

Yes, absolutely. We've already sold to some, a few college campuses. You know, that is not as big for us as specifically school districts. I can't say why, but you know, just in general, colleges is also something very interesting for us. We sold in colleges more to security operations within colleges, whereas in schools we're selling specifically to teachers and security and, people that are working at the schools, the management of the schools. So we just see that as a bigger and bigger opportunity. And again, we sell both to the schools and to the yellow school buses, so it allows us to have a full opportunity to sell both our handsets and our vehicle devices.

You know, the answer to your question is yes, we are going after universities for sure, but specifically K-12, we believe that that's the bigger opportunity.

Speaker 0

Understandable. Thank you.

Speaker 2

Thank you.

Speaker 4

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