Vislink Technologies, Inc. (NASDAQ:VISL) Q3 2023 Earnings Call Transcript

Vislink Technologies, Inc. (NASDAQ:VISL) Q3 2023 Earnings Call Transcript November 8, 2023

Vislink Technologies, Inc. misses on earnings expectations. Reported EPS is $-0.82704 EPS, expectations were $-0.8.

Operator: Good afternoon. Welcome to Vislink's Third Quarter 2023 Earnings Conference Call. My name is Alan and I will be your operator for today's call. Joining us today are the company's CEO, Mickey Miller; and CFO, Paul Norridge. Following their remarks, we will open the call to questions. Earlier this afternoon, Vislink released results for the third quarter ended September 30, 2023. A copy of the press release is available on the company's website. Before we begin the call, I would like to provide Vislink's Safe Harbor statement, which includes cautions regarding forward-looking statements made during this call. Management will make statements during the call that include forward-looking statements within the meaning of the federal securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including, without limitation, or examination of operating trends and financial expectations are based upon the company's current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not rely on these statements. For a list of the risks and uncertainties associated with the company's business, please see the company's filings with the Securities and Exchange Commission. Vislink disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements whether because of new information, future events or otherwise.

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This conference call contains time-sensitive information that is accurate only as of the live broadcast of this afternoon, November 8, 2023. Now I would like to turn the call over to Vislink's CEO, Mr. Mickey Miller. Sir, please proceed.

Mickey Miller: Thank you, operator, and thank you everyone for joining us today. This afternoon, we filed our 10-Q with the SEC and issued a press release that provided our financial results for the third quarter ended September 30, 2023, along with highlighted business accomplishments. As a brief overview for today's call, I'll begin by providing third quarter highlights and recent updates before passing the call to Paul to discuss our financial results in more detail. I'll then come back on to discuss updates within our key markets, product developments and progress on our go-to-market strategy before taking your questions. And with that, let's begin. In Q3, we made solid progress in our ongoing transformation, maintaining our strong focus on the growing public safety market.

A standout moment for the quarter was a strategic acquisition of Broadcast Microwave Services, or BMS assets. This acquisition solidified Vislink's position as the leader in the Airborne Video Downlink or AVDS market, extending our reach across OEMs and end customers, including key players in the emerging drone communications and control networks market. We believe this positions us for near-term top line growth ahead of our initial projections. Financially, our cost management efforts lowered our breakeven point alongside a noteworthy sequential rebound in total revenue led by core MilGov revenue growth of 34% year-over-year and improved key profitability measures, including a 10.6% increase in quarterly gross profit and a reduction in net loss by about $800,000 in Q3.

As we continue to execute on opportunities within our robust weighted sales funnel, which currently totals over $40 million and contains significant prospects in both MilGov and Live production. Our refined sales approach and commitment to providing industry-leading technology remain central to our strategy for enhancing overall performance. In Q3, we continue to strengthen our strategically constructed product portfolio. We proudly introduced a Cliq OFDM transmitter and have already delivered six units to customers. We expect Cliq deliveries to vastly accelerate throughout 2024. We also added to our best-in-class products with the unveiling of the WMT LiveLink, our new bonded cellular transmitter, which received the IBC TVB Europe Best of Show award.

This compact and power efficient product is driving demand across the MilGov and Live production sectors by transforming remote, video and data transmission. When combined with our LinkMatrix solution, it creates an all encompassing workflow management platform, enhancing operational efficiency for customers and generating valuable recurring revenue streams through integrated service level agreements for Vislink. We have steadily improved our services revenue throughout the year. In summary, the third quarter exemplified our transformation and growth behind our recent acquisition of BMS assets, our robust sales funnel, and improving sales and operations, we believe we are well positioned to continue improving our market position and financial performance.

I'll speak more specifically about some of our operations shortly, but first I'd like to pass it on to Paul to give the details of the financials. Paul?

Paul Norridge: Thank you, Mickey and good afternoon everyone. Looking at our financial results for the third quarter. Our total revenue for the third quarter of 2023 was $7.2 million, compared to $7.1 million from quarter three 2022, the slight year-over-year increase in revenue is primarily due to growth in the MilGov sector and increased adoption of service level agreements. Gross profit for the third quarter of 2023 was $3.9 million, compared to $3.5 million in the third quarter of 2022. Our gross profit margin for the third quarter of 2023 was 54%, an improvement from 49% in the third quarter of 2022. The improvement in our gross margin resulted from MilGov mix improvements and cost savings in components. Total expenses in the third quarter of 2023 were $9.5 million, a 5% decrease from $9.9 million for the same period in 2022.

The improvement in total expenses was primarily driven by improvements in the cost of components previously mentioned. Turning to our profitability measures, we recorded an operating loss of $2.3 million compared to $2.8 million in the prior year period. The decrease in operating loss was primarily due to the improvements in revenue and margin previously noted. Net loss attributable to common shareholders in the third quarter of 2023 was $2 million or $0.83 per share, an improvement compared to $2.7 million or $1.16 per share in the prior year period. EBITDA for the third quarter of 2023 was a loss of $2 million compared to a loss of $2.3 million in the prior year period. Adjusted EBITDA non-GAAP metrics for the third quarter of 2023 was a loss of $1.4 million compared to a loss of $1.9 million in the third quarter of 2022.

The EBITDA results were primarily a result of cost management. A reconciliation of EBITDA to GAAP measures is contained in our earnings release issued earlier today. Moving now to our balance sheet, as of the September 30, 2023, we had cash and cash equivalents of $7.2 million compared to $11 million at the end of the second quarter. We also have invested $10.9 million in federal bonds intended to be held to maturity. In the third quarter, we increased inventory by 3% as we continue to enhance our capacity for immediate booking and shipping, optimizing inventory and increasing working capital will be a priority over the coming quarters. The cash outflow experience in the third quarter was primarily influenced by lower than expected revenue volume in the second quarter of 2023.

Additionally, approximately 5 million in shipments from the third quarter were delivered within the final two weeks of the quarter, leading to a deferral of cash collection to the fourth quarter in accordance with our standard net 30 day payment terms. Improving cash performance is a top priority in the fourth quarter and in 2024. We had $33.4 million in working capital at the end of the third quarter compared to $35.6 million at the end of quarter two. We believe our strong debt-free balance sheet gives us the flexibility to continue investing in high return on investment opportunities that align with our long-term growth potential. This includes actively seeking strategic acquisitions and partnerships in order to enhance our video communication areas, especially within the defense and public safety.

That concludes my prepared remarks. I'll now turn it back to Mickey.

Mickey Miller: Thanks Paul. I'd now like to provide more operational updates beginning with our MilGov growth segment. As our results show, our MilGov segment has demonstrated consistent growth over the past several quarters and we've successfully established a prominent position in the AVDS market. Our momentum buoyed by favorable industry conditions, is expected to further accelerate following our acquisition of important BMS assets. BMS is a long standing, recognized leader in designing and manufacturing microwave technology systems, serving a diverse clientele in government surveillance, law enforcement, UAVs, and unmanned ground vehicle markets. Adding BMS reinforces Vislink’s status as one of the world’s largest and most technologically advanced AVDS providers.

It enhances our international presence, particularly in EMEA, and opens opportunities for us to introduce and promote our products within BMS’ traditional networks. This strategic move consolidates our position in the AVDS market and leverages synergy between our offerings. While we are not providing specific figures here today, the integration is progressing exceptionally well and has exceeded our initial expectations. Our outlook is optimistic with the potential for substantial revenue growth in the coming years. Outside of BMS, Q3 was highlighted by a complete AVDS system deployment in a major city in the Mid-Atlantic region. Deployments with large law enforcement agencies like these validate our technology as a key public safety personnel rely on our systems to provide aerial surveillance and add situational awareness.

While these large scale deployments typically take months to complete, they remain incredibly important to our overall strategy of bringing in larger deals from the public safety market. Additionally, we’re encouraged by the large deals that remain in our pipeline, especially in international markets, and we see solid growth opportunities on the horizon. Our Live Production segment continues to provide the largest percentage of total revenue, and in Q3, we continue to expand our contributions to major events worldwide. Vislink products helped delivered coverage of important cultural events, including Pope Francis’ visit to France, the G20 Summit in India, and elections in Eastern Europe. Additionally, our technology had a strong presence at sporting events such as Formula 1 races, MotoGP racing, the World Rugby Championship, and college golf Championships.

In Q3, we secured a $1.8 million agreement with ASPIRE for the A2RL Autonomous Race Series, providing reliable, low latency video cockpit views to key personnel. Our partnership with FocalPoint VR enhances production quality and generates recurring revenue through an annual service level agreement by facilitating crucial data communication between the race cars and their control systems. In a move that expands our live production presence, we partner with Zoom Communications India, the nation’s largest outside broadcast service provider. They utilize our ultra-low latency 4K wireless camera systems to enhance their broadcasting footprint across Southeast Asia, aiming to become the region’s top radio frequency supplier. This order highlights the enduring value of our wireless camera systems in live event scenarios and demonstrates our ability to capitalize on significant opportunities in this dynamic market.

We recently partnered with JB&A, a leading value-added distributor of audio-video solutions in the U.S. Through this agreement, JB&A will offer our solutions, including IP bonded cellular technology, vPilot and LinkMatrix to broadcasters and content creators nationwide. While it’s early in the partnership, we anticipate strong growth opportunities in our Live Production segment. As we continue to emphasize MilGov, live production remains a key part of our strategy and top line. In product innovation, we achieved early success with LiveLink, our cutting edge bonded cellular transmitter. LiveLink delivers high quality video transmission up to 4K resolution, making it a game changer for public safety agencies and broadcast teams. Its significance as the most compact and power efficient unit available is generating significant demand in both our MilGov and live production markets.

Cliq OFDM transmitter demand remains strong as it enables live broadcasts to capture more dynamic content. These compact mini camera transmitters have received highly positive responses from live broadcast customers, underscoring their appeal in a market that values compact design without compromising reliable video transmission. We’ve also taken significant steps to enhance our device management ecosystem. We expand our LinkMatrix platform to seamlessly work with AWS, streamline and remote production workflows and enabling better collaboration. This is especially crucial for both live broadcast and efficient field operation and public safety. With the AWS integration, we provide essential insights for improving remote product workflows, further deepening our value proposition to our clients and fostering valuable touch points for integrated service level agreements.

Our public safety go-to-mark strategy continues to evolve and expand. While maintaining strong partnerships with major aviation units, we are actively cultivating our relationships with large OEMs, and the BMS acquisition will accelerate this. We’re leveraging the new team members’ expertise to foster valuable connections and drive growth. BMS has a strong position with military and public safety agencies throughout the Middle East. Combining Vislink’s AVDS systems with BMS’ incumbency in the region uniquely positions us to support agencies as they upgrade their networks to support the latest and low-latency video centric IP networks. We were only 7.5 weeks into the integration of BMS into our platform, but we are very encouraged about the possibilities to serve a wide audience and grow revenues accordingly.

Moreover, we are actively identifying promising opportunities in the drone communications and control network space. BMS is particularly active in this unpenetrated sector, providing us with additional avenues to enhance our presence and expand our MilGov business. Our pipeline is showing early growth internationally, especially in South America. While these deals may require additional time for processing due to their size and complexity, we remain unwavering our commitment to see them through to fruition. On the marketing front, we continue to seize opportunities at industry conferences and trade shows. For instance, we recently showcased our full product portfolio at the IBC. Later this month, I’ll represent Vislink at the 2023 Milipol Paris show, a four day conference dedicated to security innovation on an international scale.

This platform allows us to demonstrate our technology’s ability to deliver high quality real-time video data in challenging safety and law enforcement environments, connecting us with major agencies worldwide. We’ve also strengthened our software and service sales, enhancing our recurring revenue streams. Our attachment strategy for software and services diversifies our revenue sources and strengthen our client relationships, ultimately fostering retention and a healthier sales pipeline. We are making steady progress to our goal of achieving a 90-10 sales split between software and services and hardware. Overall, our go-to-market strategies outlined earlier this year are beginning to bear fruit. And with the BMS acquisition, we anticipate expanding our customer base, fortifying our partnerships, and converting our robust pipeline into tangible sales.

As we optimize our sales approach, we look forward to the opportunities that lie ahead in 2024 with the potential to significantly enhance our market presence, revenue generation and the future trajectory of Vislink. In closing, our Q3 performance and ongoing activities reflect our commitment to growth and transformation. Recent acquisitions and partnerships are strengthening our position in the MilGov market and present additional growth prospects. With a solid sales pipeline and a focus on financial sustainability, we believe we can achieve success in Q4 and throughout 2024. As we secure contracts with prominent law enforcement agencies, we expect our enhanced visibility to further enrich our pipeline across the Americas and globally. Looking ahead to the end of the year and beyond, we see immense potential to amplify our market presence, escalate revenue and shape the future of Vislink.

Operator, please provide the appropriate instructions.

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