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Edited Transcript of BOXL earnings conference call or presentation 16-May-19 1:00pm GMT

Q1 2019 Boxlight Corp Earnings Call

LAWRENCEVILLE Jun 4, 2019 (Thomson StreetEvents) -- Edited Transcript of BOXLIGHT Corp earnings conference call or presentation Thursday, May 16, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* James Mark Elliott

Boxlight Corporation - Chairman & CEO

* Michael Ross Pope

Boxlight Corporation - President & Director

* Takesha Brown

Boxlight Corporation - CFO

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Conference Call Participants

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* Allen Robert Klee

Maxim Group LLC, Research Division - Senior VP & Senior TMT Analyst

* Brian David Kinstlinger

Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst

* Hunter Louis Diamond

Diamond Equity Research LLC - CEO & Founder

* John Nobile

Taglich Brothers, Inc., Research Division - Principal Equity Analyst

* Stephen Hart

Hayden IR, LLC - Head of Capital Markets Advisory

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Presentation

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Operator [1]

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Greetings, and welcome to the Boxlight Corporation First Quarter 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Stephen Hart of Hayden IR. Thank you. Sir, you may begin.

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Stephen Hart, Hayden IR, LLC - Head of Capital Markets Advisory [2]

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Thank you very much, and welcome to Boxlight's First Quarter 2019 Earnings Conference Call.

By now, everyone should have had access to the earnings press release, which was issued this morning at approximately 8:30 a.m. Eastern Time. This call is being webcast and is available for replay.

In our remarks today, we 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, our relationships with the customers, market 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 our most recent Form 10-Q, Form 10-K and in other reports filed with the SEC. The company undertakes no obligation to update any forward-looking statements.

On this call, we will refer to non-GAAP measures that, when used in combination with GAAP results, provide us with additional analytical tools to understand our operations. We provide the reconciliations to the most directly comparable GAAP financial measures in our earnings press release, which will be posted on our Investor Relations section at our website at investors.boxlight.com.

And with that, I'm pleased to hand the call over to Boxlight's CEO, Mark Elliott.

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James Mark Elliott, Boxlight Corporation - Chairman & CEO [3]

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Thank you, Stephen, and good morning, everyone. We're very pleased to speak with you all again. Building off our very productive and successful 2018, we are positioned for a favorable 2019 and beyond as the K-12 classroom continues to evolve with interactive learning technologies, and our products and services are at the forefront of this technology transition.

The first quarter is seasonally our slowest revenue quarter and not a predictor of full year performance. The decline from Q1 2018 was [come up] with some large contracts that fulfilled in 2018 and several projects that were delayed in 2019.

We do reaffirm our guidance for 2019 of 25% organic growth to $47 million. The health of our business should be measured over the entire year, including the stronger second and third quarters. Over the past 3 years, we have grown our annual revenues from $20 million to $26 million to $38 million, and we believe we are better positioned for growth today that at any time in our history.

Our reseller partner network is as strong and loyal as ever and, coupled with our seasoned management team, strong sales force and continued product development, enables us to deliver our best-in-class and award-winning interactive technology solutions to the education market globally.

We've added several new reseller partners this year, including S&L Integrated Systems in Georgia, Florida and Alabama, Intra-Core in Wisconsin and Bahwan CyberTek in Oman. We welcome our new partners and thank them for their confidence in our company to best service their respective market.

Additionally, we've strengthened our relationship with several key national resellers, including Troxell, Howard Technology Solutions, CDW-G and other strong regional partners as we have competed for several of the most significant opportunities across the country. We truly have the strongest network of partners in the industry, and we consider them an extension of our Boxlight family. We sell exclusively through channel partners, and they are a significant contributor to our continued growth.

Our team has done a tremendous job in developing an innovative hardware, software and service solution that educators need to improve engagement and learning in the classroom. This is reflected in the large number of successful implementation we have deployed in our tremendous sales pipeline across the United States and key international markets, including EMEA and Latin America. We're targeting a record number of prospective sales opportunities, and given our high success rate, we feel extremely confident in our year-over-year growth prospects. We're very pleased with our international progress to date in the EMEA market. As a result of our Cohuba acquisition and several key additions to our executive sales and support teams, we anticipate in excess of 10% of our total revenue from the EMEA market.

We are also seeing increased adoption in Latin America with our broad product suite that provides solutions for every budget in every market. We were selected as the official vendor to appear on federal purchasing contracts for all education institutions in Puerto Rico, Peru and Chile. And we expect significant sales contribution from those countries and the broader Latin American market.

We recently launched international Microsoft in U.K. English, French, Spanish, German and Arabic to assist in our international growth. We also are growing and producing other targeted marketing materials and participating in trade shows, conferences and other international events, including the BETT conference in the U.K., the GESS Dubai conference for the Middle East, the Schools and Academies Show in London, Santillana Compartir Sixth Congress in Mexico City and EduTech in Aguascalientes, Mexico.

Our mission to change the classroom, change the world extends beyond the United States and developed countries to the entire world. We're one of the few companies that provide solutions to connect classrooms in developing economies with low-cost solutions, including our Mimio MikroTik, MimioTeach, MimioFrame and interactive projectors. Each of our lower-cost display utilize our core MimioStudio software solution, providing the same ease of use and integrated total solution approach. We are also realizing increased gross profit margin as a result of better negotiated cost transactions on key hardware solutions with our primary vendors and improving product mix with growing revenues from high-margin hardware, software and services.

High-margin hardware solutions include our Mimio microbot or MimioMyBot, which is the robotic solution, MimioFrame, MimioTeach and integrated peripherals. High-margin software includes Boxlight Unplug'd, Boxlight NDMS and our Qwizdom software solution suite.

Our service offerings also contribute high margins, and we are seeing an increase in opportunities. As an example, we were recently awarded the services contract with Clayton County School District in Georgia for $860,000 in professional development. The contract includes online instructor-led certifications for 600 teachers to be completed by July, developing training materials for their district technology liaisons and providing on-site Boxlight digital learning specialists that are 100% dedicated to Clayton County. This professional services contract is in addition to the contract for interactive flat panels and accessories for 3,200 classrooms awarded last year, of which 3,000 have been successfully installed and deployed on time and on budget.

Our professional development team continues to expand their course offerings, including developing a complete MimioStudio certification program in English and Spanish. Additionally, they are developing training for Boxlight NDMS, Boxlight Unplug'd, MimioMyBot as well as self-paced online training for the Qwizdom software solutions.

Our whole-class learning solutions are in 60 countries supported in 32 languages and installed in nearly 1 million classrooms. Our solutions encompass collaborative learning, assessment for learning, STEM and robotics. We have 500-plus global reseller partners that assist in identifying, positioning and winning contracts. Our complete solution approach is a key differentiator for Boxlight, allowing our channel sales partners to be consultative and provide the right solution and value to meet the customers' unique needs and requirements.

We were rewarded -- awarded several significant contracts in the first quarter. Colorado's Cooperative Education Purchasing Council selected Boxlight and DHE Computer Systems as exclusive providers for certain classroom audiovisual solutions, including Boxlight's ProColor 65-inch and 75-inch panels, MimioTeach, MimioBoard and Mimio interactive ultrashort-throw projectors in their respective categories. The purchasing contract represents approximately 70% of the K-12 published school enrollment for the state of Colorado and allows any school in the cooperative to purchase our selective interactive technologies without going to bid.

Michigan's REMC Association awarded Boxlight and Digital Age Technologies as providers for classroom technology solutions on behalf of all Michigan schools, including Boxlight ProColor 65-inch and 75-inch panels, MimioTeach, MimioBoard and Mimio interactive ultrashort-throw projectors. The contract is effective January 1, 2019, and goes through December 31, 2020.

Charter School for Applied Technologies, the largest charter school group in New York State, selected Boxlight to outfit its classrooms with 75-inch interactive flat panel displays. We were also selected for a significant RFP in Chesapeake public schools in Virginia, which has over 39,000 students.

As we stated in our last earnings call, after an extensive evaluation and pilot process, Boxlight was selected by San Diego Unified School District in August 2018 to supply 75-inch interactive flat panels to 150 classrooms within the district. In November 2018, an education bond referendum was passed, providing for significant additional funds to purchase additional educational technology. With the funding, a decision was made by the district to install an additional 6,000 classrooms, specifying our 75-inch interactive flat panel over a 70 -- over a 5-year period. Our channel partner was provided the contract from the district that will be used in their submission for Board approval scheduled for the May 28 Board meeting. The district is requesting installation of 1,200 classrooms between June and August of this year and 1,200 per year for the remaining 4 years.

We continue to clearly deliver to and exceed our customers' expectations. Happy customers who are willing to provide glowing recommendations are especially critical in the public sector arena. We made a great deal of progress in 2018 and thus far in 2019. We're growing rapidly as there is a clear demand for our products and recognition among school districts and industry partners that Boxlight technology is best suited for the future learning environment.

The replacement of older-technology interactive whiteboards is in full swing across the world. This, coupled with acceptance of exciting technologies and solutions, such as tablet, Chromebooks, formative assessment, differentiated instruction, small group collaboration, STEM and the inclusion of special needs into the mainstream, will continue to fuel our growth. We also have the best solution set available, offering a total solution with tested, proven products and services to deliver results with customers to back up our claims and statements. We have a dramatically growing market with real needs that we address better than anyone anywhere.

We're winning in the public arena. Our competitive advantages are with extensive pilots. Our incredible and loyal channel partner family network, who have a choice of providers themselves, continue to choose Boxlight because we provide the complete total solution. It's an exciting time at Boxlight with our mission to improve learning and engagement in classrooms and to help educators enhance student outcomes.

I want to thank our dedicated trusted employees, our trusted customers and our supportive partners. There is much more to do in delivering in our best-in-class and award-winning interactive technology solutions for the global education market and continuing to build shareholder value.

With that, turn I'll turn it over to Boxlight President, Michael Pope.

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Michael Ross Pope, Boxlight Corporation - President & Director [4]

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Thank you, Mark. My comments today will focus on Boxlight's technology innovation and development, our M&A strategy, including our recent acquisition of Modern Robotics, our $4 million investment from The Lind Partners and other investor-focused developments.

As Mark stated, our complete solution with integrated hardware and software are the backbone of our product offering and key to our differentiation. Our ability to innovate is a critical element of our future strategy to emerge as a global leader and provider of interactive technologies for education. We have had several significant product introductions in recent months. New solution launches include Boxlight NDMS, MimioStudio 12, Boxlight Unplug'd, MimioInteract and Mimio Cloud, to name a few.

Additionally, on March 14, Boxlight closed the acquisition of Modern Robotics for a total purchase price of just under $1 million with consideration of primarily Boxlight common stock. Modern Robotics are the creators of MyBot, a powerful and innovative K-12 ecosystem and robotics program that helps students from preschool to high school develop skills and a passion for programming and robotics. Through the cohesive software platform and innovative robots, educators receive an out-of-the-box solution complete with a robust curriculum, STEM lessons, tutorials and videos. We're excited to expand our offerings in the high-demand STEM and robotics market by offering the MimioMyBot solution. Over the next 12 months, we expect to generate over $2 million in robotics and programming revenues with gross profit margins greater than 50%.

Additionally, as Mark stated, our services division was awarded a contract with Clayton County, Georgia for $860,000. We will see continued traction with our services division and expect them to produce as much as 10% of our total revenues by 2020 with gross profit margins greater than 60%.

We've committed to complement our organic growth through strategic and accretive acquisitions, and we are delivering on that promise. Our success with STEM solutions, improved software strategy, growing international revenues and increased service offerings are concrete examples. We continue to target acquisition opportunities that either increase our worldwide distribution or add a new technology solutions opportunities that complement our integrated solution suite and increase our gross profit potential. We expect 2019 to bring additional acquisition opportunities as we look to continue to expand our reach globally and enhance our comprehensive solution suite.

In March, we closed the $4 million investment from The Lind Partners in the form of a convertible note with a 24-month maturity and a fixed conversion price of $4 per share. With this investment, we feel we are adequately capitalized to execute on our 2019 plans, and this investment will bridge our operations to positive cash flow.

With that, I will now turn the call over to our CFO, Takesha Brown.

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Takesha Brown, Boxlight Corporation - CFO [5]

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Thanks, Michael. I will now review our Q1 2019 results.

Revenue for the 3 months ended March 31, 2019, was $5 million, a decrease of $1 million or 16% compared to $6 million for the 3 months ended March 31, 2018. The decrease is primarily attributable to the fact that in the first quarter 2018, the company fulfilled a couple of large projects, which resulted in an increase in sales for MimioTeach, projectors and panels. In addition, there were certain projects that were delayed during the first quarter but are still expected to be recognized in 2019.

Gross profit for the 3 months ended March 31, 2019, was $1.6 million, an increase of $0.1 million compared to $1.5 million for the 3 months ended March 31, 2018. The resulting gross margin was 31.6% for the 3 months ended March 31, 2019, compared to 24.7% for the 3 months ended March 31, 2018. The increase was attributable to a shift in product mix to include higher-margin product and services revenue and a decrease in freight cost.

General and administrative expenses for the 3 months ended March 31, 2019, was $3.8 million, an increase of $0.6 million or 18% compared to $3.2 million for the 3 months ended March 31, 2018. The increase resulted primarily from an increase in salary expense, primarily as a result of new acquisitions in 2018.

Research and development expenses for the 3 months ended March 31, 2019, was $0.3 million, an increase of $0.2 million or 155% compared to $0.1 million for the 3 months ended March 31, 2018. Research and development expenses primarily consist of costs associated with the development of proprietary technology. The increase was due primarily to research and development contractors and salary expense.

Other income or expense for the 3 months ended March 31, 2019, was an expense of $2.3 million as compared to income of $0.9 million for the 3 months ended March 31, 2018. The increase in other expense was mainly noncash and due to the change in fair value of derivative liabilities.

Operating loss for the 3 months ended March 31, 2019, was $2.4 million, an increase of $0.6 million or 34% compared to $1.8 million for the 3 months ended March 31, 2018.

Adjusted EBITDA loss for the 3 months ended March 31, 2019, was $1.8 million, an increase of $0.7 million or 70% compared to $1.1 million for the 3 months ended March 31, 2018.

Net loss for the 3 months ended March 31, 2019, was $4.7 million, an increase of $3.8 million or 418% compared to $0.9 million for the 3 months ended March 31, 2018. The resulting EPS loss for the 3 months ended March 31, 2019, was $0.46 per diluted share compared to $0.09 per diluted share for the 3 months ended March 31, 2018. The increase in net loss was primarily due to salary expense, research and development costs and changes in fair value of derivative liabilities.

At March 31, 2019, Boxlight had $2.7 million of cash, $20.7 million of total assets, $3.7 million of debt and 10.6 million shares issued and outstanding.

In summary, we note that first quarter is seasonally our slowest revenue quarter. However, we are still on target to meet the 25% year-over-year growth to $47 million with gross profit margins of 25% to 30%.

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

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Brian Kinstlinger with Alliance Global Partners.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [2]

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Can you provide an update regarding the pilot or early progress you're making at San Diego and when that customer might decide to move forward with a larger-scale installation?

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James Mark Elliott, Boxlight Corporation - Chairman & CEO [3]

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Absolutely, Brian. San Diego, they installed about 48 classrooms already in the first quarter, and they've gone incredibly well. The reason they did the reissue of the RFP is because of the funding that became available through the referendum there, and they wanted to tie it together so they can have it and be able to purchase additional units and up to 6,000 classrooms. So that's what they specified now, and the bid that they issued specified Boxlight. And so it's come out. It's now been approved by the recommendation group right there. They submitted to our channel partner transfer communication, and they will then package that together for the Board approval that will be hopefully on May 28. So...

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [4]

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So essentially, there's an RFP out there, a new RFP out there right now that highlights you and Troxell and as soon as that's awarded with the new funding?

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James Mark Elliott, Boxlight Corporation - Chairman & CEO [5]

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Yes. Well, the RFP's already been out, and it's been in and approved by the selection group. And so now they have taken it to our channel partner, Troxell, and then they have said, "This is what we want to do, and here's the agreement that we have with you that we will include in the submission package to the Board on May 28." So it's there, it's done. Now it's just ready to be approved, and they want to start deploying immediately in June. So they would be looking at installing up to 1,200 classrooms before the end of July -- or before the end of August.

So it's a real strong endorsement. I mean, the pilot they went through is like a 15-month pilot with everybody that you can imagine, where you had to have 5 of our products there, and they rotated them across multiple schools and things, and they did extensive, extensive evaluation. And out of that, they decided that we were the best solution to meet their requirements. And so then they did -- the first RFP, which was specifically for back in August, they had a fund of -- for 150 classrooms, and that's what they were deploying against. But when the referendum passed across the entire county there, then that's when they decided they need to pull it back and redo everything and get the legal team in place, so they could purchase this for much larger-scale deployment.

So it's a good thing for Boxlight and our partners, but it did impact some of our first quarter revenue.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [6]

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Yes. And then maybe you can size the Charter School for Applied Technologies contract as well as the federal purchasing contract maybe in dollars value. And then on the federal purchasing contract, is Boxlight a sole-source vendor? And is that an IDIQ or GWAC where there's no commitments, but they buy under this -- the vendor at pre-agreed-upon prices?

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James Mark Elliott, Boxlight Corporation - Chairman & CEO [7]

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Yes. Yes, there was a buzz that came out, and they were selected, we were selected in those categories, but the Colorado is a cooperative purchasing agreement. They had vendors present, they selected, and they came up with the best value. And in that product, our products that we outlined are interactive flat panels, projectors and things like that within that category. So now in Colorado and in Michigan -- and we also have one in the prior year in Iowa, a similar arrangement there. And this is a buying vehicle that the schools can go to this contract and purchase without having to go to bid.

So it's a very advantageous purchasing agreement, and it's a very prestigious prize to be then selected in those areas right there. And in the Latin American countries of Chile and Peru and in Puerto Rico, it's a similar arrangement. They have a catalog that goes out, but they select who's going to be in the catalog, and that then allows them to buy off of that. So...

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [8]

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Are you the only company in the catalog? Or is there another vendor in the catalog as well?

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James Mark Elliott, Boxlight Corporation - Chairman & CEO [9]

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In the Latin American countries, there may be -- I'm not certain on that one. I'm pretty sure that we're the primary selected one right there, but I'll have to check on that for you, Brian. I couldn't make sure we have the details, but we're in the catalog in those categories, and whether we're exclusive or not, there, I'm not certain. I believe we are in Puerto Rico and also in Chile, but I'm not sure about Peru.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [10]

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Okay. And then on the last conference, you talked about -- I hadn't heard that one, but on the press release, you remarked about Chesapeake schools. Maybe size, scope and duration of that contract. If you already said it, I may have missed it.

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James Mark Elliott, Boxlight Corporation - Chairman & CEO [11]

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Yes. Chesapeake is a 39,000-student school district there. And so they're going to be around 2,000 classrooms, and they will be deploying that over some period of time. And typically, it's going to be -- it's going to vary depending on their rollout schedules and things like that. But this is the buying vehicle that we use, and we will start working with them as they come out with their deployment schedules.

But typically, you know, we've had districts -- Clayton County was a good example. Their original RFP and purchasing agreement that they came out with was to deploy 3,200 classrooms over 2 to 3 years. After putting them in, they decided that they wanted to do that in 6 months. And so that was a really good thing right there for us as a company, but we've had others that have had 5-year plans there, and they stick to the 5-year plans. So it really depends on the budget and the requirements and the replacement needs of the districts.

So the good side is once they've ordered, then it's predictable, and we sit down with them and our channel partners to look at the rollout schedule and how they're going to be deployed.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [12]

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So in terms of Chesapeake, in total contract value, that's similar to Clayton County's given the size of the classrooms. Or am I reading that incorrectly?

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James Mark Elliott, Boxlight Corporation - Chairman & CEO [13]

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No. It would be approximately 2,000 classroom over time there and $2,000 to $3,000 classroom range dependent on whether they just go with a flat panel or whether they're having our peripherals. And those are all possibilities for that. But we'll...

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [14]

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The last question I have, on the $4 million investment. When I looked at the cash flow statement in the Q, I saw $2.2 million is what it seemed like recognized on the cash flow statement. Will the rest be recognized in the June quarter or received?

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Takesha Brown, Boxlight Corporation - CFO [15]

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Yes, that is correct. We received $2 million initially in first quarter, and the second $2 million came in, in April.

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Operator [16]

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Our next question comes from the line of Allen Klee with Maxim.

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Allen Robert Klee, Maxim Group LLC, Research Division - Senior VP & Senior TMT Analyst [17]

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In terms of your margins for the quarter, I wanted to try to understand, I guess going forward, I guess, first off, the Chinese tariffs, do you think that that's going to impact the margins? Has that been taken into account in your guidance for 25% to 30% for the year?

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Michael Ross Pope, Boxlight Corporation - President & Director [18]

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Yes. Great questions. So the answer is yes, we have taken that into account. Also, the tariffs do affect -- that's absolutely right, is it also affects everybody else in the industry and our competitors. We're looking at some contingency plans, just trying to figure out how we can reduce the cost of our goods coming into the U.S. from China with those tariffs. And there's some things that we have in place that we're working on with some of our manufacturers. But that is a major consideration. But even with that, yes, we plan on the 25% to 30% total margin.

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James Mark Elliott, Boxlight Corporation - Chairman & CEO [19]

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Our key manufacturers over there are aware of this, and they are looking and they have plans in place to start manufacturing in countries that aren't in China. And so that's a huge impact for them, and so they've put plans in place to allow us to do that. And right now, they haven't been impacted with the harmonic code.

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Allen Robert Klee, Maxim Group LLC, Research Division - Senior VP & Senior TMT Analyst [20]

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Okay. You mentioned that some projects were delayed in 1Q and you expect to recognize that revenue later in the year. Could you provide some color on that?

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James Mark Elliott, Boxlight Corporation - Chairman & CEO [21]

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Well, San Diego was certainly one that we had that moved out. We also had Shelby County of Memphis, Tennessee that selected -- had a bid that went out right there. But they had a new superintendent search started, and so they decided to move things out from there. North Hills School District had an RFP in Q1, but then they decided to reissue it. Now we have since won that RFP, and as a matter of fact, we got a purchase order from Troxell today for 176 classrooms there.

So those were some that had an impact right there where they just moved out or they had changes in their administration right there that could have moved in, and that we accounted on for the first quarter that had moved out, but we continue to believe that we're going to get them. So certainly, San Diego is in there, Shelby County is looking very, very positive, and the North Hills, we've already gotten. So those would have been the swing and what we were looking at. But they are moved out, and we're very confident about that.

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Allen Robert Klee, Maxim Group LLC, Research Division - Senior VP & Senior TMT Analyst [22]

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Okay. And then just in terms of the competitive environment for bidding, have you noticed any changes in terms of your competitors in terms of pricing discipline or anything else like that?

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James Mark Elliott, Boxlight Corporation - Chairman & CEO [23]

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Well, what we've seen, Allen, is that there have been several competitors that have dropped out of the flat panel market. There are companies like AVer and Qomo and HoverCam, and they -- and also InFocus. So significant companies that decided that the cash requirements for this were more than they initially asked for. And so we're then dropping out of that tale because there's nothing worse in the market than to have a desperate competitor.

So we're then going out, put a little more stability in there. And we monitor all the bids that come out. We know the range that we need to be in, with the fact that we have an integrated solution there that gives us some competitive advantages right there because people are prepared to pay more value for our products there because we can add in the peripherals without a whole other issues. And they also -- we protect their investment in their existing lesson plans because we're -- we do an incredible job of being able to take lesson plans developed by our competitors, primarily SMART and Promethean, and that we can operate those. Many have had to survive and coexist with SMART and Promethean for years, and so their software is incredibly capable of doing that. So what that means is that we provide districts the advantage of protecting what they develop. We can also allow them to do a better job in training because they can do it on one platform there. And it makes it easier for them to recruit teachers into the districts.

So these are competitive advantages that we offer that others don't, that give us a margin advantage there. And they're very, very easily defined as far as what the costs are and the disturbance and unhappiness that they create with teachers that have spent 10 or 15 years developing lessons and have them -- be told that they're going to have to change that and go to another environment. And it's not something they want to do. So we provide them that capability, and then we provide them the base capabilities and software to allow them to also grow in the new environments such as Google and other integration.

So that's the thing, and having competitors drop off has been a good thing for us. We've had multiple channel partners. I mentioned Intra-Core. That was one that was a competitive channel partner in Wisconsin. And so they've already picked us up, and we're going and having others approach us for the same thing. And we're competing with a major bid right now in Wisconsin with Intra-Core as our partner up there. Now the market...

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Allen Robert Klee, Maxim Group LLC, Research Division - Senior VP & Senior TMT Analyst [24]

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Great.

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James Mark Elliott, Boxlight Corporation - Chairman & CEO [25]

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Go ahead. I'm sorry, Allen.

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Allen Robert Klee, Maxim Group LLC, Research Division - Senior VP & Senior TMT Analyst [26]

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No, no, I didn't mean to interrupt if you had more to say.

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James Mark Elliott, Boxlight Corporation - Chairman & CEO [27]

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I was just going to say, we're seeing traditional market shakeup is there. There are a lot of competitors. I can tell you that Troxell has indicated at one time they had 19 partners that they were selling for, and they narrowed that down to 3. And so -- and that's similar across the board. So customers are now starting to recognize that they may have had a product there in interactive flat panels or other things like that, but they don't have the wherewithal to last or they don't have the complete solution, including software, services, support and training. And so those are key elements that speak well for us, and our belief that we're going to continue to be one of the key providers in this sector right here.

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Allen Robert Klee, Maxim Group LLC, Research Division - Senior VP & Senior TMT Analyst [28]

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My last question is, just how do you feel about the pipeline of potential M&A?

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Michael Ross Pope, Boxlight Corporation - President & Director [29]

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Yes. So, good question, Allen. So we still have a very strong pipeline of M&A opportunities. We consistently have companies coming to us, in fact, more so now than in the past because we're gaining more market share in the industry, and so we're a little bit more visible.

But also, we actively go out and look for opportunities. We do plan on acquiring additional companies this year. We don't have any specific guidance on that. But we're also very selective, right, as we're looking at acquisitions. You can look at the acquisitions we closed over the last 12 months, that each of those 4 acquisitions were perhaps small in size but very meaningful to our total solution suite and our longer-term strategy.

And so as we're looking at new acquisitions, we have that same methodology where we're looking at companies that we think can improve what we have, not necessarily shake up what we have or dramatically change our trajectory, right? We're just looking for things that augment what we're already doing.

And so maybe keep an eye out, we're definitely going to have more acquisitions in the future, and think of those acquisitions as similar to what we've done in the past. Specifically, I would say looking at additional distribution, right, like we've talked about and also additional technology opportunities or software opportunities.

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Operator [30]

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Our next question comes from the line of John Nobile with Taglich Brothers.

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John Nobile, Taglich Brothers, Inc., Research Division - Principal Equity Analyst [31]

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A lot of my questions were already addressed, but I just wanted to get back into the delays that impacted the first quarter results. I know that going back to the third quarter of last year, you had some delays, and it really gave you a great fourth quarter, as a matter of fact, the record fourth quarter.

So in regard to the first quarter delays, how do you think this is going to shake out as far as second, third or fourth quarter? Might we assume that a lot of this may show up in the second quarter? Or do you think that it could be into the third? I just want to get an idea of how much of this is going to break out over the coming quarters.

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James Mark Elliott, Boxlight Corporation - Chairman & CEO [32]

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Yes. And again, the first quarter is a really tough quarter for anybody in the education space right there. And it is really not a good predictor of the future right there. I talk with several of our -- all of our key channel partners out there, and they had similar delays that were there. And however, they went on to comment that the business and the business of their people is at an all-time high, that they're spending a whole lot of time now, and there's a lot of interest there across the team.

The reason that I've heard that I think makes sense for some of the delays is that there's a big replacement market that's happening right now for interactive whiteboards and projectors. And there's also a lot of people that are looking at Chromebooks and things like that, and these are major deployments. And so they're now analyzing their requirements, and they're putting them together. And so they are looking at things like this, whereas in the past, they would have just been buying in the first quarter. And so now they're grouping them together, and that's why we're seeing bigger bids that are coming out and larger deployments.

So we've got a lot of activity. Our pipeline is very really, really strong. Some of these opportunities, I'd love to be able to talk about, but we can't for competitive reasons and other things like that. But the delays in the first quarter were -- I think that's the biggest reason I can come up with. There's been a lot of activity, a lot of -- our channel salespeople and then our channel partners have been busier than they've ever been, and they're proposing and presenting and getting exposure to these. But I think it's because there's a lot of technology that's now in play. Schools that have had interactive whiteboards for 10 or 15 years now are saying it's time to replace them. And so that's part of it. And then they're looking at the tablets and other devices that tie into that as well as peripherals. And so it's a big decision, and they're grouping them together and doing a little more scrutiny. But they are, have and will continue, I believe. And from our pipeline and everything, we're not losing them. They're just moving forward, and then they will be deployed this year.

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John Nobile, Taglich Brothers, Inc., Research Division - Principal Equity Analyst [33]

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Okay. And if I could just bring up the guidance, I'm just -- actually, I'm reading the press release here, and it says that it's 25% organic revenue growth. I saw the word organic, so -- I know that you recently acquired Modern Robotics. I just want to get an idea of, that growth rate, is that inclusive of Modern Robotics? Or is Modern Robotics on top of that?

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James Mark Elliott, Boxlight Corporation - Chairman & CEO [34]

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Yes. Modern Robotics is included in that. Not a tremendous amount this year, I think we're looking at $1 million to $2 million out of them. We've got a lot of answers in this everywhere from this. And if you look at STEM as a category in general, that's the hottest market, period. Everybody is talking about that globally for all the right reasons, and robotics is the most visible approach there. So we've got companies like LEGOs and others that have been out there. We think that we have a solution. And the CEO of Modern Robotics was a very strong insider within the LEGO's group. He provided sensors and devices to the LEGO's teams. So he understands LEGO, and he understands the strengths that they have in the areas that we can focus on to enhance that.

One big advantage that we have with Modern Robotics and our robotic solution is that LEGO sells direct in the United States and a lot of other developing countries, and our channel partners are looking for a strong cohesive system that ties into that.

We're also looking at developing interfaces into our existing Labdisc product that we have to allow us to integrate between the 2 products there, which can give us a competitive differentiation right there.

So Modern Robotics is going to be a big contributor. I was at a recent conference in Austin, Texas where you have 30 minutes with the respective districts, their CIOs and technology and academics people. And every one of them were incredibly interested in our robotics approach there and responding set aside at the district level and at the federal levels, and I'm sure that we're doing the right things there. And we're also enhancing that with our EOS group, our professional development team, developing training and curriculum we can complement that.

So we think that we're going to have a very, very powerful solution there with the Modern Robotics solution.

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John Nobile, Taglich Brothers, Inc., Research Division - Principal Equity Analyst [35]

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I agree. I believe that's a very, very good acquisition, Modern Robotics obviously. The market projections for the overall market is very strong. But if I could get -- I know you had mentioned earlier over $2 million in revenues over the next 12 months, approximately $2 million in this Modern Robotics segment. If I could get your idea of what you think, a few more years out, what you might be able to penetrate in the market a few years out. I don't know if you've talked about this as far as market penetration, but being it's a big market, what do you see like maybe 3, 5 years out in this?

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Michael Ross Pope, Boxlight Corporation - President & Director [36]

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Yes. So John, a good question. We definitely have some of those numbers internally. I would say as far as what we're comfortable sharing externally now as you look at the growth in robotics and STEM, it's double-digit per year, and by some measures, it's on the higher end of that. And we feel like we can grow north of that, right? Just like we say, edtech globally, we're going to grow north of the market because we're taking market share. We're going to do the same thing in robotics. The opportunity is, obviously, very extreme. And I think we're going to have a better gauge of that over the next couple of quarters, and we'll be able to provide some better guidance on what robotics could look like.

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John Nobile, Taglich Brothers, Inc., Research Division - Principal Equity Analyst [37]

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Fair enough. I -- just one final question. I was hoping you could talk a little about what you believe the potential for sales of your products in the U.K. looks like since your acquisition of Cohuba.

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James Mark Elliott, Boxlight Corporation - Chairman & CEO [38]

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Yes. We've run -- we had a -- the guy that was in charge of the Cohuba group, Andy Pennington, was in charge of product management for Promethean. And he's with us, and he's working on our product management team now over several key areas. We've got -- we recruited kind of [mayhem] who came in from Promethean and from another competitor over there. And he's built up a team there that's from competitors. And so we've built an infrastructure. We've got the product mix in place there. We've been doing a lot of marketing over there with him. We've brought in several key channel partners in that market. And we've been winning. We won the largest academies, which is similar to a charter school program here in the United States, Academics Education Trust (sic) [Academies Enterprise Trust]. They've got 60 schools, and they've selected us. So we're very optimistic of what -- about what they're going to be able to do. They're not just in the U.K., but they're also in EMEA. And we've seen them through the trade shows and the conferences and the people that we brought onboard that were part of other organizations and competitors. They're bringing in their pipeline and their channel partners with them.

So they're on track, and we've got an experienced team there. And we've got the infrastructure and the product mix that they need and also the messaging because Cohuba does really have the complete total solution approach there, and we've given them that as a foundation.

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Michael Ross Pope, Boxlight Corporation - President & Director [39]

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Yes. And John, specifically, we put out some guidance you probably caught earlier that we expect the EMEA region to be north of 10% of our total sales this year. So there's some guidance for you, and we expect a lot of good things out of that group in future years as well.

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Operator [40]

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(Operator Instructions) Our next question comes from the line of Hunter Diamond with Diamond Equity Research.

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Hunter Louis Diamond, Diamond Equity Research LLC - CEO & Founder [41]

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So just a quick question. I looked at the operating cash flow that turned positive this quarter. I'm just trying to understand and given the recent $4 million financing, how are you guys thinking about the financing options you have? And in terms of how much financing you're looking to pursue given the recent cash flow turned positive, do you expect that to continue? And just your thoughts with the financing and overall investing back into the business.

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Michael Ross Pope, Boxlight Corporation - President & Director [42]

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Yes. So Hunter, good questions. So the positive cash flow from operations is a function, of course, changes in other operating assets. And so we did have a loss, of course, in Q1 and an adjusted EBITDA loss. And so I think that's just kind of a fluctuation that you shouldn't expect going forward.

As far as financing, we did provide guidance of bringing in the $4 million from The Lind Partners, which is going to bridge us to positive cash flow. And so we don't have any plans to raise additional capital at this point in time other than perhaps looking at some options to have a better debt partner. But as of now, we don't have any other plans for new financings.

As far as what you should expect going forward, we also provided guidance and we commit to this that we plan on being positive cash flow and also starting to produce positive EBITDA or adjusted EBITDA, I should say, this year as well. And you're really going to see that come to fruition starting kind of Q2, Q3, right? That's a big buying season. That's when we have the large revenue numbers. And we plan to generate sufficient revenue to offset our operating expenses to bring us to that positive adjusted EBITDA.

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Operator [43]

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We have no further questions at this time. Mr. Elliott, I would now like to turn the floor back over to you for closing comments.

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James Mark Elliott, Boxlight Corporation - Chairman & CEO [44]

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Okay. Well, thanks, everybody, for joining us and your support and being a part of our first quarter conference call. And we look forward to speaking with you next quarter. Thanks a lot. Bye-bye.