Good afternoon, and welcome to the Boxlight Corporation Fourth Quarter Financial Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference is being recorded. I will now turn the conference over to our host, Jeff Stanlis of FNK IR. You may begin.

Thank you, Paul, and thank you everybody for joining. Earlier today, Boxlight issued a press release providing an operational update and discussing financial results for the fourth quarter and full year ended December 31, 2023. The release is available on the Investor Relations section of the company's website at www.boxlight.com. Hosting the call today are Dale Strang, Chief Executive Officer, and Greg Wiggins, the company's Chief Financial Officer. Before we begin, I would like to remind participants that during the call, management will be making forward-looking statements. These statements may contain information about Boxlight's view of its future expectations, plans and prospects that can constitute forward-looking statements. Actual results may differ materially from historical results and those indicated by the forward-looking statements as a result of a variety of factors, including, but not limited to, risks and uncertainties associated with its ability to maintain and grow its business, variability of operating results, its development and introduction of new products and services, marketing and other business development initiatives, and the competition in the industry among other things. Boxlight encourages you to review other factors that may affect its future results and performance in Boxlight's filings with the Securities and Exchange Commission. The company does not undertake and specifically disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, except as required by law. And with that, I'd like to now turn the call over to Dale Strang, CEO of Boxlight. Dale, the call is yours.

Thank you, Jeff, and thank you to everyone joining us today. I transitioned from our Board of Directors to the position of Chief Executive Officer just over two months ago, and I can share with you that my first few weeks in the role have reinforced the prior perception I had about Boxlight. We indeed have excellent products, loyal customers and devoted creative employees who work exceptionally hard. So, the foundation here at Boxlight is strong. Over the past few years, we've made a number of acquisitions to broaden our product portfolio and to increase our geographic reach. These acquisitions have resulted in expanding our addressable market. Following the completion of those acquisitions during 2022 and 2023, we were able to pay down a meaningful portion of the long-term debt we took on to make those acquisitions, and we're convinced that was the right and valid decision. However, after a surge in pandemic-related spending, the market demand moderated, and we didn't, as an organization, react nearly quickly enough to reduce our forecasts, adjust our operating plan and align our expense structure to match the current market environment. Not surprisingly, the combination of these missteps impacted our operations and put a spotlight on certain inefficiencies in our organization. We're now in the process of changing our corporate mindset. My approach is to manage based on what's the best available factual information and accurate forecasting is paramount for sound capital allocation and to efficiently manage our operations. We recognize that our investors have been frustrated and rightfully so by Boxlight overpromising and underdelivering. We view our share price as a report card on our performance, and we're making adjustments to our operational activities to position us to achieve better grades this year. To be clear, our challenges will take time and energy to address. There's no single solution, and improvement will not happen overnight. There are several challenges to address, and many of the challenges we face are self-inflicted. One challenge is our capital structure. We need to streamline our debt facilities while solidifying our relationship with other stakeholders like our preferred shareholders. Another is operational integration. The multiple acquisitions we've made over the past several years enabled us to grow and expand our product portfolio and enhanced our team, but we've not done enough yet to integrate those acquisitions, which has resulted in duplicative costs, repetitive processes and a fragmented go-to-market strategy. Put simply, we've just not done enough to integrate those valuable assets acquired over the last several years. As a result, our cost structure has revealed to be too high, and we're not capitalizing on the synergies that we have in front of us that can drive efficiencies. These challenges have been heightened by the marketplace dynamics in the education market, which benefited greatly from accelerated government investment during the pandemic, and then corrected once that accelerated government investment started to soften. Boxlight, like many companies, scaled our infrastructure during that pandemic to respond to increased demand, but we were a little too slow to respond when the demand moderated. I've been here about 10 weeks since I assumed this position and we've made significant progress on addressing the issues I outlined. First, we're realigning our leadership team, focused on creating a more customer-centric organization that's designed to better understand the evolving needs of our customers. We are actively engaged, making sure that we develop these tailored solutions that help meet those needs. We're making really good progress, great progress in streamlining our product catalog, eliminating redundant products, parts and other items that consume time and resources without adding commensurate value. We are taking aggressive steps to adjust our operating cost base with a focus on aligning those costs exactly to what the current revenue opportunity is likely to be. We kicked off multiple efficiency-driven work streams that will result in us taking millions of dollars out of our annualized operating expenses. That drive for operating expense efficiency won't be momentary, it will be thorough and ongoing. Another item we're streamlining, as mentioned, is our capital structure. Our senior debt facility at WhiteHawk was intended to be a short-term solution to fuel our growth initiatives, and prior management expected to refinance that term debt by the end of 2023. And while that hasn't yet happened, we've had productive engagement with those lenders and we're working towards resolution. We've engaged an investment banker to provide us with options, and the initiative is moving forward. In the interim, our existing lenders have been very supportive and cooperative with us as we evaluate an appropriate long-term solution and work towards that resolution. This has been a period of significant change in Boxlight. New senior leadership, restructuring operational leadership, adjustments to our go-to-market approach, and aggressive cost reductions are all going on simultaneously. I'm incredibly impressed with the positive reaction from our employees who embraced the challenge of the new Boxlight and responded with creativity and renewed dedication. Similarly, our customers have been very positive, seeing the changes underway as beneficial to their needs. Our lenders have been highly cooperative as well. We're convinced we're on the right path, with much work still to do, but we have key pieces in place. Let me speak to the near-term achievements we anticipate delivering to help drive those sustainable improvements in our operations particularly. First, investors should expect to see a meaningful reduction in operating expenses, positioning us for sustainable profitability. We have already eliminated approximately $3 million in annualized fixed costs, and there are more to come, not just in the elimination of fixed costs but in operational efficiencies overall. We see significant opportunities for future growth, and we're committed to investing in the areas that are going to drive those growth opportunities and results. We're not going to cut costs recklessly, but we also will not spend a nickel more than we need to. Second, we expect to advance initiatives to replace our existing debt with a more permanent facility, either a new debt arrangement or another option to enable us to fund our growth. We also expect to finalize an agreement with our preferred shareholders, directly aligning us with these important stakeholders as we work together to execute this turnaround. Third, investors can expect better sales efficiency as we break down some of the silos that remain from our multiple acquisitions and establish a single-market presence that resonates even more clearly with our customers. Finally, we're in the process of introducing several new products across our Clevertouch, Mimio, and FrontRow brand lineup. These include industry-leading, highly-capable, Google-certified EDLA interactive panels that feature enhanced audio and video. We have new devices coming online that make our legacy panels EDLA compatible, which is very important to our installed base customers. We've made numerous enhancements to our suite of campus and classroom communication software. These products maintain our technical lead in the marketplace and they're unique in their integrated solution value. We're the only company that provides the kind of integrated solutions that we're describing here. Most importantly, they are in line with what our customers are asking for. We are confident these solutions will contribute substantially to our improved results in 2024 and beyond. With that, I'll now turn the call over to Greg to discuss the fourth quarter and full year results.

Thanks, Dale, and good afternoon, everyone. As Dale mentioned, Boxlight's management team is focused on bolstering our balance sheet and reducing our fixed costs. Before discussing the historic results, let me speak to these two important initiatives. Boxlight continues to work closely with our lenders with the goal of maintaining our liquidity while seeking a longer-term solution. To date, our lenders have been very collaborative and they have expressed appreciation for the recent changes to solidify our foundation. We very much appreciate their ongoing support. Simultaneously, we are working with our investment bankers to identify and evaluate options to replace our debt facility. We are communicating regularly with our lenders to keep them apprised of the progress in forging a new facility. We are also actively communicating with our preferred shareholders, and they have indicated a willingness to maintain the status quo in relation to the preferred stock, giving us the runway to execute our turnaround. We appreciate their ongoing support and commitment to helping our company succeed. Given their industry expertise and company insights as the former owners of our Sahara business, we have included them as informal advisors to our Board of Directors. We are confident their guidance will be an asset for us moving forward. From an expense management perspective, we have eliminated approximately $3 million in fixed costs over the last two months, mostly through headcount reductions that do not impact our sales teams or other revenue-generating departments within the organization. These reductions will take time to appear on our income statement, but investors should see the initial benefits in the second quarter with additional reductions benefiting the balance of the year. I'll now review our fourth quarter results. Revenues for Q4 2023 were $38.8 million as compared to $42.8 million for Q4 2022, resulting in a 9.3% decrease. EMEA revenues comprised 52% or $20.2 million of our total revenues, while Americas revenues totaled 46% or $17.8 million of our total revenues, and revenues from other markets totaled 2% or $0.8 million of our total revenues. Flat panel displays comprised approximately 71% of total revenues. Audio solutions comprised 13% of total revenues, with the balance comprised of device accessories, software, professional services, and STEM solutions. Gross profit for the quarter was $12.3 million as compared to $14.4 million for the prior-year period. Gross profit margin for the quarter was 31.7%, which is a decrease of 190 basis points over the comparable three months in 2022. The decline in gross profit margin in Q4 is primarily due to non-recurring adjustments to cost of goods sold, partially offset by higher margins associated with FrontRow products. Our current product margins have remained consistent with prior quarters in 2023, and we expect to return to higher gross margins in Q1 2024. Total operating expenses for Q4 2023 were $28.9 million, inclusive of $12 million of non-cash impairment charges. In addition, the company recognized incremental non-cash stock compensation expense of approximately $600,000 for the cancellation of certain previously issued equity awards. Excluding the non-cash impairment charges and incremental stock compensation expense, total operating expenses were approximately $16.3 million compared to $15.2 million in Q4 2022. The increase was due primarily to increased employee-related expenses to support the company's growth in certain markets. Other expense for Q4 2023 was a net expense of $2.6 million as compared to net expense of $1.6 million for Q4 2022. The increase in other expenses was primarily due to fluctuations in the gain or loss recognized from the change in fair value of derivative liabilities. The company reported a net loss of $16.6 million or $1.76 per basic and diluted share for the quarter as compared to a net loss of $2 million or $0.25 per basic and diluted share for the prior-year quarter. Adjusted EBITDA loss for Q4 2023 was $1.1 million as compared to adjusted EBITDA income of $2.6 million for Q4 2022. Adjustments to EBITDA include stock-based compensation expense, impairment charges, gains/losses from the remeasurement of derivative liabilities, gains/losses recognized upon the settlement of certain debt instruments, and the effects of purchase accounting adjustments in connection with recent acquisitions. For full year 2023, adjusted EBITDA was $12.6 million as compared to $18.9 million for the prior year. Turning to the balance sheet. At December 31, 2023, Boxlight had $17.3 million in cash, $54.1 million in working capital, $44.1 million in inventory, $158.6 million in total assets, $40.2 million in debt, net of debt issuance costs of $3.1 million, and $16.8 million in stockholders' equity. At December 31, Boxlight had 9.7 million common shares issued and outstanding and 3.1 million preferred shares issued and outstanding. Subsequent to year-end, the company paid down $1.6 million in principal on its term loan, with the principal balance currently at $41.7 million. Looking ahead to 2024, the company is expecting full year revenues to remain flat year-over-year with a continued return to traditional seasonal trends. For Q1 2024, the company expects revenues of approximately $34 million and to approximate 18% to 20% of total annual revenues. While the company has not observed significant product margin decline in recent periods outside of the non-recurring charges in Q4 previously discussed, we are forecasting a 100 to 200 basis point decline in gross margin percentage for full year 2024 as the flat panel market continues to mature. Managing operating expenses, primarily controlling our fixed G&A costs to align with forecasted revenues, remains the primary focus for 2024. In January, the company eliminated approximately 25 positions, primarily in non-sales roles, which we estimate will save the company approximately $3 million on an annual run rate basis. Other cost-saving measures, including further reductions in employee-related expenditures, are in process, and we look forward to updating you with our progress on future calls. The company is committed to reducing operating expenses to approximately $12.5 million to $13 million per quarter on an annual basis, and expects to begin achieving new quarterly run rates by the end of 2024. We are forecasting adjusted EBITDA for Q1 2024 after giving consideration to severance and other charges associated with our recent headcount reduction of negative $3 million. Managing our debt and equity structure is also a top priority for the company in 2024. We are actively seeking to refinance our debt facility with more favorable terms while maintaining a healthy EBITDA leverage ratio. We continue to monitor our short-term working capital cash requirements to ensure we have appropriate levels of inventory on hand for future periods. While we may look to obtain liquidity to meet these working capital needs, we are focused on achieving solutions that are not dilutive to our shareholders. With that, we'll open up the call for questions.

Thank you. At this time, we'll be conducting a question-and-answer session. And the first question today is coming from Brian Kinstlinger from Alliance Global. Brian, your line is live.

Great. Thanks for all the comments. In your prepared remarks, actually in the press release, you mentioned customers' needs are changing and the market is evolving. Your company is making changes to align with that changing market. What are the changes customers are asking for? Is it new products? Is it going to require new M&A, new personnel? And how much capital will it take to meet these adjustments?

Hey, Brian, this is Dale, and thank you. I think there's a lot of pieces to that as to how the customer needs are evolving. A couple of ways we're responding just today that we see as being quite timely is the panels themselves are evolving into much more highly functional computer devices that have a lot more productivity software that educators use every day. It's making it easier for them to interact directly with the panels as opposed to using a Chromebook or another intermediate device. It's super important to the customers that are leading the way on this to understand how to use these devices that are certified by Google's EDLA program and receive training to make sure that their customers get the most out of them. Our new batch of EDLA panels have all that, and we're one of the very few in the market that offer EDLA certified panels. We provide specific training on both the panels overall, the Google stuff in general, and specific applications that others can't provide. Again, this is what customers want, not only the technology but the backing and knowledge on how to use it. Another aspect that's really coming to the fore is that it's not just about front-of-classroom instruction any longer. More and more of our districts are looking at classroom-wide or campus-wide communications, and that's where our FrontRow product line comes in. By integrating our FrontRow line of audio products and services with video, we can not only improve instruction and make it much more meaningful and impactful, but we can also tie into the building-wide and campus-wide communications that are increasingly important in the context of safety. This is opening up a whole new range of conversations for us. Again, this is what more and more people are looking for, and we're lucky to have an asset base in FrontRow that can really respond. Long-term, so regarding M&A, we believe that our company is where it is today because of that. We think that it's going to be a very opportunity-rich environment for augmentation. You don't have to look far for the technology drivers that are going to make that happen; AI being the current one. By having our operation be well integrated and highly efficient, it will position us to take advantage of those opportunities as they emerge.

Right. And then, can you speak to the order trends thus far in the March quarter? Have they picked up from the December quarter? I guess the heart of the question is, what gives you confidence given the recent trends that you can generate flat year-over-year revenues?

Yeah. So a couple of things, go ahead, Greg.

A couple of things on that. So, as we talked on our last earnings call, we went through multiple quarters, four quarters or so of down year-over-year sales order results. In Q3, you might remember, we actually saw a slight uptick in sales orders, roughly 10% for the quarter, and that decreased slightly about 3% globally in Q4, with our EMEA business actually increasing in sales orders, partially offset by some of our U.S. sales orders. The early indications in Q1 have pointed to some positive signs, maybe a very modest return to order growth in the U.S. as well. We're seeing sporadic data points but certainly a positive change from where we were in the fourth quarter going into Q3. We're starting to see data points that indicate a turnaround in the industry as well as our discussions that we have in the industry. So, I think those data points align as well. And Greg, I know you want to add something to that.

I think I just want to emphasize two things. One is the intense focus we've put on really improving our forecasting accuracy, which will continue to be. We recognize it's important to us and to our stakeholders for us to commit to a number and hit that number. That has always been tough to do in this market because it's a difficult forecast market, and it tends to be a bit lumpy in terms of big orders getting pushed. But we're committed to making that happen, to ensuring that we have an accurate number. On a global basis, again, the pandemic spiked what was traditionally a slow and steady growth market into an intense period of growth. Since the pandemic, there has been a sort of negative hangover resulting in an unnatural downturn in cyclicality over time. We're closely focusing on the seasonality represented by each quarter. The early signals from that data and from the anecdotal data from the field indicate that our flat revenue outlook for the year is sound, but we'll obviously stay right on top of it. I'm not sure if that answers your question.

It does. No, it does. Thank you. The last question I have, I'm hearing you guys right with the cost cutting and future potential cost cutting, you talked about where you would exit the year at a G&A level. And based on the first quarter adjusted EBITDA loss guidance, we're not seeing much of that is what I sense. And with the order trends, I sense the second quarter will probably also be breakeven to a loss too, given the third quarter is where most of your revenue is generated. So, I'm wondering if there's anything to think about from a covenants that we should be mindful of?

Yeah. So a couple of thoughts there to address. Yes, throughout the year, there will be a little lumpiness in our operating expense savings. We can speak a little more closely to the first quarter. As you indicated, where we want to be by the end of the year, we anticipate being at our future run rate of that $12.5 million, $13 million of operating expenses per quarter. In the first quarter, you're correct that some of the other restructuring charges that have gone into some of the changes made, especially when a significant number of changes were headcount related, have some costs that offset some of the immediate savings that won't really be realized until we get into Q2, Q3. Additionally, there are other initiatives that we alluded to in our prepared remarks, and this is an ongoing process. Further changes will happen, and the timeframe for executing some of those will certainly impact the timing of those reductions in Q2 and Q3. We've stopped short of providing full year guidance at this point on where we'll land for the year, but for Q2 and Q3, we'll gradually work towards our new run rate by the end of the year. From a debt compliance standpoint, we are focused on refinancing our current credit facility while also continuing to work with our existing lenders regarding covenant compliance and we continue to have those discussions as we progress through the year.

Okay. Thank you. Good luck.

Thank you. The next question is coming from Jack Vander Aarde from Maxim Group. Jack, your line is live.

Okay, great. Thanks, Dale. Thanks, Greg. Just a couple of questions to follow-up. Dale, can you talk a little bit more about your 2024 revenue outlook, which is for roughly flattish growth? But in terms of geography, are you expecting flattish growth across the board? Or any puts and takes there, whether it be the U.S. market, EMEA, or some of the other growth markets you've been gaining share in? Is it kind of a blanket, just kind of flattish growth or are any markets expected to outperform and others to lag?

It's tough to say, but thank you, Jack. It's difficult to look at EMEA and claim that it’s a blanket scenario. Our two biggest markets are naturally the U.S. and the UK. We're seeing pretty sharp growth in smaller bases, particularly in markets like Germany, where we've invested aggressively over the last couple of years and are seeing real results. We're also seeing growth not just geographically but by sector; we believe our FrontRow business will grow nicely this year and positively influence our U.S. results. Overall, on a blended basis, EMEA appears to be experiencing some continued softness when averaged with everything else, while the panel market in the U.S. is still looking flat to down. If we achieve the number we're discussing, it will be due to all these factors. We will take some market share, the market will perform well in certain areas, and we'll blend our STEM product, training services, and audio products to achieve the result. It's also important to note that the U.S. isn't homogeneous either; we're observing really strong performance in certain states that are growing quickly, and those states will continue to perform well. Again, Jack, I'm not sure if that covers everything. Globally, the market will remain relatively flat, but we think we're well positioned in areas where we can achieve growth and are working vigorously to fill any white spaces to ensure we capitalize on available business.

Okay, great. That covers a lot of that. I appreciate that. And then maybe a follow-up for Greg and Dale, maybe you can contribute to this as well. But just on the cost reduction front and the go-forward goal, I believe I heard you mention targeting maybe a $12 million to $13 million normalized quarterly operating expense. Can you provide a sense of what kind of normalized or targeted adjusted EBITDA margin looks like? It sounds like gross margins might be adjusting downward but still remain pretty strong relative to historical levels, so further operating expense cuts. Just wondering what a normalized profit or adjusted EBITDA margin looks like in your view, if you could speak to any of that?

I think our goal on a go-forward basis, on a full run rate after we start to achieve these operating expense reductions this year, is to sustain an adjusted EBITDA margin north of 10%. We believe this is achievable. Many of the operating expense reductions we plan to implement this year are based on a flat year-over-year revenue outlook. We expect some modest growth over time, but even on a flat revenue basis, we think with the planned operating expense reductions, all things considered, we can achieve and sustain a double-digit EBITDA margin going forward.

That's helpful. I have one more question regarding the press release. Dale, can you discuss the new Clevertouch headquarters and warehouse? From the press releases, it appears to be 35% larger. How does this decision align with your cost-cutting initiatives while anticipating future growth? Does this move solidify your confidence in an increase in growth for the latter half of the year?

Yeah, sure. The new facility is a vast improvement over what we had before. Most of that is based on consolidation and efficiency. If you’ve ever managed a warehouse, just the ease with which repetitive tasks can be performed can really add up to significant logistical improvements. This state-of-the-art warehouse has ample room for fluctuations in inventory levels. Infrastructure-wise, it's ideally located near transport centers outside of London. Additionally, it offers a more effective workplace for our staff compared to the previous facility. We're excited about it, believing it benefits both efficiency and productivity. We committed to this based on the expectation of future growth and we're set for that.

Okay. Great. That's it for me, guys. Thank you.

Thank you. There were no other questions at this time. I would now like to hand the call back to Dale Strang for closing remarks.

Well, thank you everyone for your support and for joining us today on our fourth quarter 2023 conference call. As I mentioned, the pieces for meaningful improvement are in place. We have a clear understanding of the challenges we need to address and a plan in place to drive improvements. I'm incredibly proud of the team for responding to the challenges and operating with both professionalism as well as energy and creativity. We look forward to speaking with you again in May when we report our Q1 2024 results.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Have a wonderful day. Thank you for your participation.