Boxlight Corporation (BOXL) Q4 2018 Earnings Report, Transcript and Summary

Greetings, and welcome to the Boxlight Corporation Fourth Quarter 2018 Earnings Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. I would now like to turn the conference over to your host, Mr. Stephen Hart. Thank you. Mr. Hart, you may now begin.

Thank you very much. Welcome to the Boxlight Corporation’s fourth quarter and year-end 2018 earnings conference call. By now, everyone should have had access to the earnings press release which was issued today at approximately 4.15 Eastern. 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 our partners and resellers and 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-K and 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 have provided reconciliations to the most directly comparable GAAP financial measures in our press release which will be posted to the Investor Relations section of our Web site at investors.boxlight.com. And with that, I'll now hand the call over to Boxlight's Chief Executive Officer, Mark Elliott. Mark, the call is yours.

Thank you, Stephen, and good afternoon, everyone. We’re pleased to speak with you all again. We had an extremely eventful and productive 2018, particularly in the fourth quarter. Our strong momentum continued after the important back-to-school season and through the fourth quarter. In fact, it was a quarterly record in the history of our company. Revenues for the quarter totaled $12 million, an increase of 125% compared to the same quarter last year. Revenues for the year ended 2018 were 37.8 million, up 47% over the comparable period last year. 2018 revenue continues to benefit from greater adoption of our existing product suite, continued product introductions and growth in our reseller network. We’ve successfully grown our sales pipeline across the United States and in key international markets including Europe, the Middle East, Africa, India and Latin America, which has resulted in the largest sales pipeline in our history. We see a significant opportunity to continue our growth trajectory well into the future through product introductions, growth in our reseller network and through strategic acquisitions. It is 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 employees, our trusted clients and our supportive partners. While 2018 was a huge success, we know this is just the beginning and there is much work to do in delivering our best-in-class and award-winning interactive technology solutions for the global education market, and continuing to build shareholder value. Perhaps the greatest test to what we do and how we do it is the number of new competitive bid contract wins we have received and the successful customer implementation we are delivering with our customers who are without a doubt our greatest advocates. 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 strongly believe in letting our customers articulate why they have chosen Boxlight and our respected channel partners and the results they have realized with our solutions. We encourage you to review the customer testimonials and podcast available on our Web site from a wide spectrum of schools across the United States and globally. We are clearly delivering to and exceeding their expectations. Happy customers who are willing to provide glowing recommendation is essentially critical in the public sector arena. They simply cannot afford to make a mistake and risk misappropriating the responsibilities they have in educating our children. Customers like Clayton County, Georgia; Beaufort County, South Carolina; McMinn County, Tennessee; Huntington Beach, California; Buffalo charter schools in New York; Connellsville Area School District in Pennsylvania; and Academies Enterprise Trust, a consortium of 60 plus schools in the United Kingdom have provided their testimonials and more importantly are hosting prospective school districts to share their selection criteria and results they’re achieving with Boxlight and our partners. For example, Connellsville Area School District, CASD, has replaced existing projectors with interactive flat panels from Boxlight; a large rural school district south of Pittsburg, CASD is committed to providing its 4,400 students with tools that would help them thrive in a 21st Century learning environment. As a part of that commitment, the district invested in 270 ProColor interactive flat panels and is implementing a 1 to 1 program with Chromebooks and a myriad of other tools that help level the technology playing field for teachers and students alike. Additionally, as part of this initiative to transform current classrooms into powerful technology rich learning environments, South Carolina’s leaders in Beaufort County School District partnered with Boxlight in outfitting hundreds of classrooms with the latest interactive education technology. Our technology solution, a highly regarded partner and reseller, is spearheading the installations. The decision by the district to replace existing interactive technologies with Boxlight interactive solutions followed a rigorous formal evaluation process where as many as 16 vendors were evaluated. All told, Beaufort County is purchasing 1,750 ProColor 752U interactive flat panels and then quite successfully installed approximately 900 classrooms already that include MimioStudio for the creation and delivery of engaging lessons. The new 75-inch, ultra-high definition ProColor flat panel displays provide 4K-clarity so that onscreen content is easier to see, even in large classrooms. The displays’ Touch 360 degree interactivity also features up to 20 single touch points or 10 dual touch for gestures allowing users to work simultaneously driving collaborative learning. Beaufort County hosted a visit from a similar size district in Georgia. The visiting district was highly impressed with the results Beaufort County is achieving with the entire suite of Boxlight solutions and services. I know this first hand because I was with the visiting district recently and their comments were, it seems such a satisfied Boxlight customer was very assuring for them in their selection and evaluation process. Nothing sells like success. California Huntington BC School District has installed 60 MimioSpace collaborative systems from Boxlight in their classrooms in order to support its expanding technology initiative. The district partnered with Boxlight and premiere reseller partner OnPoint to bring collaborative technology to classrooms in nine schools throughout the district. The addition of MimioSpace and other Boxlight products, including Boxlight Labdiscs and ProColor touch tables, is the result of a $150 million bond approved to encourage more collaborative and forward-thinking classrooms in the Huntington Beach City School District. Its expanding technology initiative aims to transform the learning process for students favoring a more collaborative and engaging environment. Additionally, Clayton County School District, the fifth-largest school district in the state of Georgia with over 55,000 students is another district that we are especially proud to be associated with as the Boxlight and Howard partner. Clayton has a highly respected and recognized leadership team with incredibly high standards and very ambitious plans for their district. Clayton has installed nearly 3,000 classrooms since July of 2018. They are on schedule and on budget and are tremendous advocates of their Boxlight total solution partnership. We will be seeing great things in the future from this outstanding district. We made a lot of progress in 2018 and thus far in 2019. Some of the products that we’ve had introductions in the recent months include Boxlight Network Device Management System, NDMS, which gives IT network administrators centralized control of their Boxlight and Mimio interactive displays. Boxlight NDMS enables creating and controlling of individual and groups of interactive flat panel displays, whereby events and activities can be scheduled and managed from one place. Also our award-winning MimioStudio 12 with the introduction of embedded live web pages and integration with Google’s widely-used G Suite for Education. Live web pages add a new dimension to the instructional process, allowing research and interaction beyond the prepared lesson to be undertaken. MimioStudio has also been refreshed with an updated contemporary look which will improve the end-user experience dramatically. Additionally, we proud to announce MimioInteract, a collection of collaborative activities designed for the Boxlight ProColor 490 touch table. We developed this in an exclusive partnership with Peter Lambert and Nigel Pearce, two internationally recognized leaders in developing interactive software solutions for the K-12 market. MimioInteract activities engage and build essential skills with students. These touch-enabled activities allow for labeling, matching, sequencing, sorting, and timelines. In addition, each activity type has an Activity Builder to assist teachers in creating their own collaborative activities and allowing them to modify existing sample activities. These highly interactive lessons are designed specifically for younger students and cover a wide range of curriculum. The table’s ability to adjust height combined with these activities make it an excellent solution for students with various needs. The Mimio MicroCloud is another new product that provides a complete cloud-enabled learning environment for any classroom anywhere in the world regardless of Internet connectivity or infrastructure limitations. The Mimio MicroCloud provides secure in-classroom WiFi access to curriculum, content, and even a Learning Management System with comprehensive resources for both students and teachers alike. Robotics and STEM is an exploding sector globally and we are proud to announce the Mimio 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 rapidly growing and as there’s a clear demand for our products and recognition among school districts and industry partners that Boxlight Technology is best suited to 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, Chromebook, formative assessment, differentiated instruction, small group collaboration, STEM and the inclusion of special [indiscernible] of the mainstream will continue to fuel our growth. We’re very optimistic about our future at Boxlight. We have incredible industry proven talent and leadership at every position that has been complemented with the synergistic mergers we have brought onboard with Cohuba, Qwizdom, EOS Education and most recently Modern Robotics. We also have the best solution sets available offering a total solution with tested, proven products and services that deliver results. With customers to backup our claims and statement, we have a dramatically growing market with real needs that we address better than anyone anywhere. We are winning in the public arena on competitive bids all with extensive pilot where they have to objective and select the best value because failure is not an option. Boxlight is also blessed with an incredible and loyal channel partner, family and network who have a choice of providers, they chose Boxlight because we provide a complete total solution that allows them to be consultative. They can listen and then recommend the right solution for the customers’ requirements and budgets anywhere in the world. Our channel partners trust our solution and our team and they know that together we will deliver happy referable customers for the long term, and that’s how we develop a successful team and a company for the future. With this recognition and performance, we are confident of the continued success for our shareholders, customers and employees. With that, I’ll turn it over to Boxlight’s President, Michael Pope.

Thanks, Mark. My comments today will focus on Boxlight’s M&A strategy including our recent acquisition of Modern Robotics and other recent investor focus developments. Earlier this month, we announced the acquisition of Modern Robotics, a STEM education company with programming and robotics solutions for the K-12 education market. Modern Robotics are the developers of MyBot, a powerful and innovative K-12 hardware and software ecosystem 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. Mimio MyBot was conceived and developed to fulfill a need in robotics and coding in the classroom. By bringing these cutting-edge teaching tools to educators, we help them engage today’s students in meaningful learning experiences that will create graduates who are workplace ready in emerging STEM fields. Over the next 12 months, it’s expected that Boxlight will produce over 2 million in robotics and programming revenues with gross profit margins greater than 50%. The acquisition also brings significant management talent to Boxlight by adding Stephen Barker who accepted the role of Vice President of STEM Education. Stephen has more than 30 years of extensive experience in robotics and technology innovation, including developing sensors and components for Lego Robotics, and brings an incredible wealth of brain trust to Boxlight’s growing STEM offerings. The addition of Modern Robotics was our fourth acquisition in the last 12 months. Since our IPO in November of 2017, we have committed to complement our organic growth through strategic accretive acquisitions and we are delivering on that promise. Specifically, we are targeting opportunities that either increase our worldwide distribution or add new technology solutions that complement our integrated solution suite and increase our gross profit potential. I’d like to take a moment and provide a progress report of our 2018 acquisitions. Last May, we acquired Cohuba based in the United Kingdom from Promethean founder, Tony Cann. The acquisition provides an experienced sales and operations team and a strong network of reseller partners with decades of experience selling into the United Kingdom and greater Europe. This transaction has provided us the opportunity to successfully penetrate the UK market and surrounding regions. Additionally, in January, we appointed Matt Hunt as head of the EMEA region. Matt has over 20 years experience and knowledge of the education sector. Under Matt’s sales leadership we expect over 5 million or greater than 10% of our total sales for fiscal year 2019 to come from the EMEA region. In June, we acquired Qwizdom, an education software company providing classroom presentation and engagement solutions. Our acquisition of Qwizdom provided the trusted network of partner relationships around the globe as well as innovative research-based software solutions designed to make teaching more effective and efficient and facilitate learning and comprehension. Also the acquisition of Qwizdom provided a talented software development team headed by Darin Beamish who serves as Vice President of Software for Boxlight. Darin continues to lead the software development and manage our global software solution roadmap. Our integrated software is not only the backbone of our product offering but also our key point of differentiation continuing to have innovative cutting edge software is a critical element of our future strategy to merge as a global leader and provider of interactive technologies. We’re thrilled to introduce several new software products this year, as Mark discussed, including MimioStudio 12 and MimioInteractive. Last November, we acquired EOS Education, an education consulting and professional development company led by Daniel and Aleksandra Leis. The acquisition was complemented or has complemented our hardware and software product suite with professional training, development and support programs and services. This is a key area of focus for us further enhancing our ability to be a total solution provider and meet the evolving needs of today’s educators at very attractive margins. This acquisition has provided numerous benefits to Boxlight, most importantly the ability to provide ongoing professional services to help educators fully leverage our technology range of possibilities which we believe will drive greater adoption of our existing product suite in the future. As the business continues to scale, we expect Boxlight professional services division to produce as much as 10% of our total revenues with gross profit margins greater than 50%. We expect 2019 to bring additional acquisition opportunities as we continue to expand our reach globally and enhance our comprehensive solution suite. Lastly, I have two updates that have immediately improved our operating cash flow position. First, after a full year of operating as a public company, we’re able to successfully obtain favorable credit terms with our key suppliers and enabling us to better manage our cash requirements and enhance our overall operational effectiveness. And second, I’m happy to announce that last week we closed on a $4 million investment from The Lind Partners in a form of a convertible note with a 24-month maturity and a fixed conversion price of $4 per share. We believe our company is currently undervalued in the market and it was important to us to have the conversion price at a premium to the current stock price. The investment proceeds will enable us to execute our aggressive growth strategy and bridge our operations to positive cash flow. Specifically, working capital initiatives include increasing inventory levels in the U.S. and Europe and completing the market launch of several new products, including our Mimio MyBot coding and robotics solution. We thank The Lind Partners for their shared enthusiasm in our business. And with that, I will now turn the call over to our CFO, Takesha Brown.

Thanks, Michael. I will now review our Q4 and full year 2018 results. Revenue for the three months ended December 31, 2018 was 12 million, an increase of 6.6 million or 125% compared to 5.3 million for the three months ended December 31, 2017. Revenue growth reflects increased sales volume driven by greater adoption of Boxlight’s product solution suite. Gross profit for the three months ended December 31, 2018 was 3 million, an increase of 2.4 million compared to 0.6 million for the three months ended December 31, 2017. The resulting gross margin was 25.2% for the three months ended December 31, 2018 compared to 11.3% for the three months ended December 31, 2017. Operating loss for the three months ended December 31, 2018 was 1.1 million, a decrease of 4.5 million or 81% compared to 5.6 million for the three months ended December 31, 2017. Adjusted EBITDA loss for the three months ended December 31, 2018 was 1 million with a slight decrease of 0.2 million or 18% compared to 1.2 million for the three months ended December 31, 2017. Net loss for the three months ended December 31, 2018 was 0.6 million, a decrease of 4 million or 87% compared to 4.6 million for the three months ended December 31, 2017. The resulting EPS loss for the three months ended December 31, 2018 was $0.06 per diluted share compared to $0.66 per diluted share for the three months ended December 31, 2017. At December 31, 2018, Boxlight had 0.9 million of cash, 21.3 million of total assets, 3 million of debt and 10.2 million shares issued and outstanding. And now on to the full year 2018 results. Revenue for the year ended December 31, 2018 was 37.8 million, an increase of 12.1 million or 47% compared to 25.7 million for the year ended December 31, 2017. Gross profit for the year ended December 31, 2018 was 8.6 million, an increase of 2.2 million compared to 6.4 million for the year ended December 31, 2017. The resulting gross margin was 22.9% for the year ended December 31, 2018 compared to 24.9% for the year ended December 31, 2017. The year-over-year decline in gross margin was primarily due to a larger concentration of interactive panel sales with lower product margins, including two large projects in Beaufort, South Carolina and Clayton County, Georgia. General and administrative expenses for the year ended December 31, 2018 were 15 million, an increase of 1.8 million or 14% compared to 13.2 million for the year ended December 31, 2017. Research and development expenses for the year ended December 31, 2018 were 0.7 million, an increase of 0.2 million or 44% compared to 0.5 million for the year ended December 31, 2017. Operating loss for the year ended December 31, 2018 was 7 million, a slight decrease compared to 7.2 million for the year ended December 31, 2017. Adjusted EBITDA loss for the year ended December 31, 2018 was 3.9 million, an increase of 2.2 million or 132% compared to 1.7 million for the year ended December 31, 2017. Net loss for the year ended December 31, 2018 was 7.2 million, an increase of 0.6 million or 10% compared to 6.5 million for the year ended December 31, 2017. The resulting EPS loss for the year ended December 31, 2018 was $0.72 per diluted share compared to $1.20 per diluted share for the year ended December 31, 2017. In summary, we are pleased to have delivered 47% year-over-year growth for 2018. We look forward to rapidly growing in this space for many years to come. With that, we’ll open up the call for questions.

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of John Nobile of Taglich Brothers. Please proceed with your questions.

Hello. Good afternoon. Thanks for taking my questions. And congratulations by the way on the results, obviously very impressive. I’m looking here the markets and enjoying it too. After hours, it’s up about $1 a share already in after hour, so it was good to see the traction in the fourth quarter. But I just wanted to get into a few things. The acquisition of Modern Robotics, I know the press release and you had mentioned that we’re looking at about $2 million in revenues with profit margins over 50% for this year to Boxlight. But do you have the numbers for what it produced in 2018 and how much revenue this did generate in 2018 please?

Yes, I’ll take that. So, John, thanks for joining as always. And so as you look at full year '18, it did about $1 million in 2018 and we plan on of course re-launching the current robotics solution plus launching some additional solutions that are going to be under our Mimio brand. And we think that we’ll have a tremendous first year.

Okay. And how big of a market do you believe there is for robotics in the classroom? And I’m hoping you could actually talk a little about the growth potential for this technology. Obviously you just mentioned you acquired a company that generated 1 million in revenue actually just last week and now you’re looking at – expecting over 2 million. So just try to get an idea of the market and the growth potential please.

Well, the market is huge for STEM globally. Everybody recognizes the advantages to the economies they have from building in this sector right here and robotics is the most common area that people look for because it is a great way to teach engineering and mathematics and programming and logic. And so any conference you go to on STEM, the robotics side is going to be the biggest area right there. And so we’re seeing tremendous excitement on a part of our channel partners. One of the largest providers in this sector is Lego and they have three different solution groups there for elementary, middle school and high school. And with Stephen Barker’s experience having been an insider within the Lego’s group, he’s developed solutions that have a lot of advantages we believe. They’re not toys. These are real robots that allow you to teach programming from the simple level with a [indiscernible] capabilities and utilize [indiscernible] which is from Google and then being able to move into the Python area right there. So it’s a product that our channel partners like because a leader in this sector is Lego and in the United States they sell direct. So our channel partners have been looking for a solution that’s real, that can grow with the customers and have a lot of value add. So robotics is a very, very hot market.

Yes, so it’s pretty fragmented, John, but market-to-market puts it at about $280 million market in 2018 and I think it’s going to grow to 2.9 billion by 2025. So that’s one. We can send you some other research, but there’s no doubt as Mark mentioned that you travel to really any school district in the country and also around the globe and it’s going to be part of the conversation.

I’m sorry, you might --

One advantage we have with all of our solutions is we’re able to and we’ll be doing this is integrating the Modern Robotics MyBot solution suite and their capabilities into our existing MimioStudio and also tie it in together with the Labdisc, which is another very popular product we have in the STEM sector.

Okay. Thanks for that color on the market. But Mike I just missed – you said, what was it, research in markets projected this market to go from about 280 to what was that and what year? I just want to get an idea of what they said. I didn’t look into this. Thanks.

That’s all right. 280 million in 2018, they have it growing to about 2.9 billion by 2025. That’s one. John, I can send you – I can pull a few of the recent reports that we see out there and I can send those to you.

I’d appreciate that. I’m going to look into this myself but that would be great. And I was hoping you could talk a little bit about your relationship with Troxell, specifically how this has benefitted your sales since that relationship began? And I was hoping that you could even shed some light into what to expect. I know you had a press release about the Illinois Technology Purchase Program with your relationship to --

[Multiple Speakers]

Excuse me, that was Iowa.

That was with Iowa, yes.

And that was through Troxell, correct?

That was with Troxell as a part of there, absolutely.

All right. And I was just hoping if you could even quantify what that mean, because I know it was talking about 65-inch, 75-inch panels and what we should look for in 2019 as far as that’s concerned?

Well, we’re extremely proud with our relationship with Troxell. It started with us working together with them on a bid for 150 classrooms in San Diego than we won successfully. And from there we’ve been competing with and winning bids in multiple places including the one you referenced in Iowa there. Troxell has got 70 seasoned sales professionals around the United States. They’re over a $200 million a year company and they’re just well respected by the K-12 educational community. They’ve been in business for many, many years and with a lot of success in delivering a comprehensive suite of solutions. So Troxell and their executive management team and us, we’ve had multiple meetings together, we’ve had planning sessions with them. We’re working individually with each of our channel managers across the country with each of their teams and participating with them in conferences and tradeshows everywhere. So we’re very excited about that it enhances our reach to have 70 people that are as entrenched and as well respected as Troxell leaders across the United States is a huge advantage for us. And we’re seeing that when they have an option to go in on bids and things like that, they are going with us.

If I could just talk a little bit more about your reseller network. Obviously you just expanded that. I’m just trying to get an idea of how much more expansion do you believe that you have with getting into more reseller networks and if there’s any near-term plans that will actually add upon resellers? I believe you just recently in the past week have added another one.

Well, we are adding them all the time when they come to us. So we have a strong sales opportunity registration program, John, that is very attractive. We have an approach with our partners that if they do the work, they should win the business and that allows them to go in with a high degree of confidence knowing that if they set the stage and they educate the school districts that they should get rewarded for it. So we have an approach, they either get list price or they get the preferred partner approach there. And so that’s a huge advantage in us recruiting and adding partners. So not only do we have Troxell, we also have Howard Computers and we work a lot with CDW. But Howard has got 25 to 30 sales reps in a multiregional, multistate area. Again, similar profile, the Clayton County and Buford County school districts we won together with them and we are in multiple bids and opportunities everywhere across the geographic areas that they concern. And the CDWG is another great organization with hundreds of inside sales people and 30 to 50 outside field sales reps that we’re working with them not only in the United States but they’ve now opened up operations in the United Kingdom for EMEA. And we’re very familiar with their executive leadership team there. We’ve had successful sales and implementation at some very prestigious school districts we have won together and they were rolling out together. And I covered some of those but some of these districts, they don’t want to have the exposure yet. But as we’ve said earlier, nothing sells like success and so they are partnering and tying in with us. And so those are just some of the others. And then regionally we have strong partners everywhere in the United States and as they will tell you and we’re really proud of our partners, they are part of our family and part of our team. We don’t sell except through channel partners. So we don’t go direct. They are an extension and a part of us. They like our approach, they like the fact that we’ve partnered together with them exclusively, do the work and we win together and we lose together with them. So it’s a big advantage for us and we’ve been able to bring in from my prior years with Promethean practically all of our Promethean resellers we brought in a whole lot of smart resellers and we’ve had competitive company channel partners from our competitors that have been coming to us all the time now. I had a meeting with one this week and we had last week several that are just coming in. So it will continue because nothing sells like success. And so that’s why they want to be tied in and they feel again that because of our suite of solutions that we have that are integrated and we have so many products that meet the different requirements, they can truly be consultative. They can go in and listen and then provide the right solution and that gives them a wonderful benefit for a long-term success and that’s what they want with these value-added resellers. They want to take advantage of relationships they develop and be able to come in and offer not just one product but a whole suite of products and solutions that allow them to successfully meet the customers’ requirements.

Our next question comes from the line of Allen Klee of Maxim Group. Please proceed with your questions.

Yes. Hi. Just looking at the guidance that you provided, two questions on that. One is for saying that you expected to revenue of at least 25% growth rate to hit the low end of that of 25%, does that imply no acquisitions? And if there were acquisitions, it would be higher. And then secondly the margins of 25% to 30%, you seem to be at the low end of that this quarter but you’re layering in these acquisitions, some of them which are higher margin. So it seem – what seemed to me there’s an opportunity for that number to kind of grow over time and maybe even exceed your original longer term goal of 30%. If maybe you could just comment on those two. Thank you.

Thanks for joining the call, Allen. So on the 25% revenue growth, we feel pretty confident of that number. And so we provided a similar number if you remember for last year and we grew of course well north of there. I don’t know that you can expect we’ll grow in '19 like we did in '18, but again we feel confident of that number. And that is an organic growth number. So if we were to go out and close various acquisitions, those will of course not be included in that 25% growth rate. But our existing acquisitions coming from the acquired in 2018, of course those will be part of that revenue figure. So that was the first part of the question. I think the second part of the question was what to expect in gross profit margins. And we mentioned in Q3 where we had a little bit of a stumble on our gross profit that we should be a 25% gross profit margin business in Q4. And so we were happy to be able to provide that to everybody and hit that number. But going forward, absolutely you ought to expect growth in that gross profit margin business just because of like you mentioned a lot of new products and services that we’re now offering which are higher margin. And so we’re going to tick up closer to that 30%. We don’t feel comfortable giving you an exact number. That’s why we gave a range. But if you’re looking beyond 2019 and we want to be a 30% margin business or even north of there into the future. And as we get a better feel for what that can be, of course we’ll provide additional guidance.

That’s great. And then you said that your pipeline was at an all-time high. Could you maybe just give a little color on just anything related to that or the makeup of it? Just specifically if you can say anything of the mix in terms of the higher margin versus lower margin businesses?

Well, we’re certainly getting a good mix right there and as I’ve talked about earlier, our channel partners like the fact that we have lower margin items like flat panels that can be complementary peripheral solutions that come in alongside that. So some examples would be school districts that start with just a flat panel but then they come back in and add [indiscernible] cameras, loading devices and tables and a lot of the other peripheral solutions that we have there. And without nearly as much competition because the fact that it’s integrated into our solutions suite right there. And so the mix there as far as the pipeline, it is skewed towards interactive flat panels but we’re also seeing globally with some of our newer solutions that we have. We got the MimioFrame that’s ideal for developing economies there. It’s less than an $1,000 and it allows them to take any projector and get them 10 points of touch which coupled with our MimioStudio software is a huge advantage. And then the Mimio Micro-Cloud is another approach that we’re bringing into global economies there where they may not have good Internet connection and this allows them to have a complete operating environment separate from that as they can manage essentially with resources on it like Khan Academy [ph] or Learning Management or anything that they desire right there that again brings the world into the classrooms without them having to be needing Internet connection. So that allows us to get higher margin products in globally into a lot of other community areas. And then some of the things we talk about with our professional development. Clearly there we’ve had a lot of excitement and we’ve had orders that are starting to come in, significant orders from our channel partners taking advantage of the suite of professional development solutions available from EOS. And they’ve got a catalogue of over 50 classes that are either on side, face-to-face or that are on on-demand. And that gives us, one, credibility in the account and two, it ensures that they are really using the technology which is what we’re all about right there. We want them to be able to take advantage of all of these and you only do that with the best training that’s there. And then it positions them to add additional products and solutions as we grow.

Allen, I would just add that we’re not providing a lot of information right now on various segments, right, or breaking down the revenue figure. That’s something that we’ll start to do a little bit in the future, specifically trying to report hardware from software from services and it will give you a little bit more clarity on what we look like around the globe U.S. versus other markets. So we’ll start to do that in future quarters. But for now we just report to our revenue figures.

Okay. Thank you. Two days ago you announced the partnership with, I’m going to say it wrong, Bahwan CyberTek. It seemed to me that this might be a new geography for you to move into. Could you talk a little about their position there and how you think about the opportunity that that brings?

The one we’ve been asked would be Critical Links and the Mimio Micro-Cloud. I’m not familiar with the one that you just referenced there.

Okay.

Could you – Michael, do you know – what was the name of the company again, Allen?

I might be saying it wrong, Bahwan CyberTek to bring Mimio classroom solutions to the Middle East.

That’s a channel partner. They are a channel partner, very strong channel partner out of Oman. So they selected us and so we’ve got a recent press release with them and they’ve got considerable resources and a presence in the Middle East. So it’s a channel partner for us and we’re very excited about adding them to our family of channel providers.

Okay. My last question would be competitively you seem to be doing everything right and given the solution you have, you seem to be winning more than your share. Is there any comment – is there anything that your competitors are doing recently that’s changed in maybe the competitive environment that you could comment on or do you think it’s been pretty consistent?

I’d say it’s been consistent. We’ve had the existing solution providers in interactive whiteboards, Smart and Promethean that are trying to protect their base and we’ve had others that come in at what I call OnPoint solutions that recognize that there’s a growing market opportunity there. And these are companies that traditionally just have one solution where they can come in and just beat on price. And that’s traditionally something that will last for a little while but then over time the school districts as we talked about in the discussion, they just can’t afford failure. And so they know that all of these ingredients have to be tied together and that’s why the bids that are objective that are out there, we’re winning because we have this complete solution. If they’re just a one trick pony, they can come in with a price on a product, they end up with finger pointer [ph], they end up with a lot of issues there and you end up with an installation that’s not successful. And so our whole foundation is built on developing successful customers that can do the sales force. And that’s why we’re hosting events with them. We’re having webinars. We’re doing a lot of marketing things with our customers to where they invite school district and surrounding areas to come in and look at what they’re doing and how and why. And for us that is the ultimate in sales. Let our customers be the ones that deliver our message and say that we live up to what we said and we’re delivering on our promises. So the competitors in those areas we’re well positioned with Smart and Promethean to be able to operate and run the lessons that schools have developed with MimioStudio. We’ve got a rich history of over 10 to 12 years of being able to do that successfully. So that protects the districts investment in all the lessons they have and then we’ve got all the other lessons and all the integrated solutions that surround it that give us really some huge competitive advantages and things our channel partners love, because they are all about relationships. The term value-added reseller is what they are and that’s what we allow them to do is add true value.

That’s a good overview, Mark. And I would just add, Allen, as well that one of our clear points of differentiation is that we have a more comprehensive product suite where all of the price are integrated into the one software solution, whereas competitors that’s not the case. And then also we’re innovating and we’re growing that product suite so that we can offer that total solution to the school districts. And as you look at Smart and Promethean, you’re going to look over the last year and see how many products that they’ve introduced into the market and then you’re not going to see much anything, right. And if you go look and see what we’ve introduced over the last 12 months into the market, you’re going to see a tremendous number of new solutions. And so that’s where we think as far as competitive landscape, we feel like they’re pretty stagnant and we’re evolving because we clearly have a goal to be a leader in this market space and we feel like we’re on our way.

Thank you so much.

Thank you, Allen. Great questions.

Our next question comes from the line of Hunter Diamond of Diamond Equity Research. Please proceed with your questions.

Firstly, congratulations guys on the great quarter and annual results, very impressive. So I just have two quick questions. One relates to the gross profit and you sort of touched on this. You’re projecting 25% to 30%, yet there were these two recent deals in South Carolina; Clayton County, Georgia that sort of pulled it down for the year to 22.9% since they were due to interactive panels. So I’m just wondering why you wouldn’t think people will keep purchasing more interactive panels, like is that just not going to be the pick of the mix or – because I would think that’s the popular sort of selection? On the second question just related to AR and BR, what you guys are seeing in this space and what are you thinking of in terms of acquisitions or new products for [indiscernible] or other virtual reality products?

Hi, Hunter. I’ll take that picture in regards to the gross profit margin. So basically the profit margin related to the Buford and Clayton County and two things kind of impacted that. One was the fact that it was a lot of flat panels, right, [indiscernible] margin product. But in addition as we’ve communicated in some of our previous conversations is that we also have to enter into some financing arrangements to be able to fund the operation to be able to get all of the equipment that we needed for these two large products.

Which had been accelerated by the way. Because initially Clayton County was going to rollout over two years and after the initial installation, the superintendent and school board members went into the schools and saw how successful and how excited everybody was about it and they said, we’re not going to do it in two years. We want to move it up into six months. So we had to put in some existing inventory that we had to meet their demand right there that we had purchased it at much higher price.

Right. When we did the original budget for them – proposal for them, we didn’t take into consideration that we’ve been utilizing some of the higher cost products that we already had in inventory. So Mark is right in regards to that. So I think it’s like three things. So it’s that. It’s the financing arrangements that we had to enter into to be able to fund it. And then it’s the fact that the panels are a lower product margin item. So if you take those two items, you can kind of see the path of how we get to our little higher product margin going forward.

Right, okay, it makes sense.

On our pipeline we’ve got a lot of districts that are lining up there and they either buy it through state contracts if they have in-purchase off of [ph] or they will do extensive pilot or they’ll go out to bid. And the pipeline’s just growing. Now at the bids we don’t know how they’re going to deploy these. Atlanta Public School we won that back in 2015 and they’ve been deploying several hundred, 500 a year there. Then you have Clayton that decides to do 3,200 in a big bang type thing. So there’s just a lot of uncertainty from their standpoint of whether they’ll get funded. We had the San Diego bid. It initially was for 150, then they had a referendum that passed and now they’re coming back out to bid. And we’ve been told that they’re going to be specifying [indiscernible] because of the valuation they did, but this time they want to look at 2,000 classrooms. So profits, it’s going to be there but we work very closely with our manufacturers and they recognize that we have to have sustained margins there. So they’re working – and longer term implementations typically we may buy at a certain price but then over just two or three years, the cost can came down. So we will have lower or better margins improve as the time goes by. And then by going back in and selling and upselling complementary peripheral solutions and products helps us tremendously with that. And a lot of the mergers that we’ve done allowed us to come back in and be able to position these products within our customer base.

Great.

Hunter, I’ll tackle the next part of the question. So this is Michael. Thanks for joining the call, Hunter. So you asked about AR and BR. So those are technologies we’re absolutely looking at. So we continually have our quotes [ph] on opportunities in technologies that have an application to education and those ones do absolutely and we’re looking at various opportunities. The key is I think for those as well as other technologies as you have to have content and you have to have lesson plans and you have to make sure that ties that state and federal standards and requirements. And as of today we’re a little bit a ways away. Also cost has been an issue especially with virtual reality and it’s cost prohibitive [ph]. But as the cost of those technologies come down and just a lot more content out there, I think in future months or quarters that’s something that we’re going to be looking at very heavily.

Hunter, there’s no shortage of great ideas out there. Companies are coming to us all of the time because they recognize that they’ve got great solutions there for a segment or niche. However, what they don’t have is all the sales and the support and the marketing and everything to allow them to get the global reach that they want. So we have companies contacting us every week saying we’d like to talk with you, we’d like to come in, we’d like to have you see what great solutions we have and how we can work together. So we find – we’ve sorted them through. Modern Robotics was a great example of that, so was Qwizdom and so was EOS. And so there’s no shortage there. The advantage that we have too is because we have the software that holds it altogether, we can then incorporate it and simplify the use of that in a classroom. And I talk in presentations we give about how 2005 there was more technology in a police car than there was in a classroom. That’s not the case today. It’s gone to the other end of the spectrum where school teachers are almost overwhelmed with so many choices and options. And so our approach is to simplify that for them and let them look at one interface and one toolset that they learned that allows them to multiply navigate through all these different solutions and then we integrate them in to simplify the approach. And we did it like we did at Apple when I was there. We want to make our software intuitive and easy to use so that they in fact use it as opposed to having this technology sit on the shelf.

Absolutely. And Hunter I’d add too that we have of course dozens of companies coming to us all the time with new technologies but also we attend all the major education conferences around the globe. And if you were to go to Bett in London every year or ISCE [ph] here in the U.S. or whatnot and you would have walked the floor, you will see dozens of companies that have virtual reality as part of their solution. And we go and meet with those as well. So again, it just comes around at making sure that it’s really market ready and it’s going to be successful in the classroom. Once that’s the case, we want to be the company to roll it out.

Right. That makes perfect sense. It’s funny you mentioned Apple. Just going in that topic. Are they like your biggest competitor when you go for bids? Obviously they have a formal education team and massive infrastructure. Would you say they’re the ones who you sort of are most competitive with when you’re bidding or not really?

Not really. When I was with Apple, education was a huge part of our overall revenues. It’s become now much more consumer like electronics and things like that. So Apple got great solutions with their iPads and laptops and other things there, but we may compete with them for budget dollars. But as far as the interactive side, we complement what they do. You’ve got a large deployment of Apple iPads or Chromebooks or things like that, they need the ability to interact and take those devices and be able to project them on to the screen and be able to work together with them. So we love seeing those type of technologies because it enhances what we do and complements and just ensures the technology is in fact doing what everyone wants which is helping to enhance sooner the achievement and outcomes.

That’s right. Our core software that we have, Hunter, the interactive displays that we have, the accessories we have, Apple doesn’t provide any of those. The software we provide is very different from Apple software. So as of today – we’re fans of Apple. Any school district is going to put Apple products in their school district. We want to be alongside them because we can fill in all the gaps. And that’s true of the larger technology companies going into the education as well. We don’t compete with Amazon and Google or any of these guys.

Microsoft.

Yes, Microsoft, the same thing. We complement. None of them plan on getting into accessories in the hardware and software side of the business we’re in or the services side either. We love companies that put or school districts that put those technologies in as well because we can go and provide services to those school districts also.

Right. That makes sense. I’ve just been more familiar. Obviously, Apple, you go to any college campus, everyone has iPad, MacBooks, but I wasn’t sure if they even had an offering similar to yours. I wasn’t aware of it. But I just knew they had obviously a strong education platform. All right, perfect.

They do. Great company and I came out of there and we brought a lot of people with us when we went to Promethean and moved here to Boxlight. So we know them, we like them and the whole classroom and change in the classroom, change in the world approach that we have here at Boxlight is complemented and added to with people like Apple and Hewlett-Packard and Microsoft and Google. We’re all going after the same thing which is to enhance educational outcomes.

Right. Okay, thank you for your time. Great answers.

Thank you. Great questions, Hunter. Thanks.

Our next question is a follow-up question from the line of John Nobile of Taglich Brothers. Please proceed with your follow-up question.

Hi. Just one quick question. I know that last call it was mentioned that EOS would generate about 10% of total sales in 2019. Now in light of your acquisition of Modern Robotics, I’m just curious if it still looks like you can achieve about 10% of total sales from services? Are we on track to maybe do this? And if you could talk a little bit about what gross margins your services would generate?

Yes, great question. So I think last quarter when we talked about EOS Education or professional services opportunity 10%, I don’t know that we mentioned in 2019. Now it may be, right, but I don’t believe we mentioned specifically '19. I think we mentioned that we expected it would grow to that 10% mark. That’s where we think it ought to be. We mentioned that again on our earnings – on our script that we just read through as well. But we haven’t given specific 2019 guidance, but we believe we’ll be pretty close to that. We’ve already started to have some wins which we hope to announce in the near future and that group is doing really well for us.

And on the Modern Robotics side we’re already developing plans for training and lesson plans with the EOS team there and they’ve done similar things for our Labdisc solution where they’re developing training that can be utilized in large school implementations like in Broward County where they purchased 2,500 of our Labdisc solutions. So the EOS team there and the training goes hand-in-hand and it just complements everything we’re doing. And so it’s going to be an integral part of everything and every solution that we provide.

Okay. And the gross margins for services, I would imagine it’s higher than products, if you could shed some light on what to expect?

That’s right. We’ve mentioned in the past north of 60% margins on the services business, so we’ll be north of that. North of 60, 6-0. That’s right. So north of 60%; robotics we said north of 50%.

That’s all I have. Thank you.

Great.

There are no further questions over the audio portion of the conference. I would now like to turn the conference back over to management for closing remarks.

Well, great questions from everyone out there and thanks for your support and for joining us today on our conference call. And we look forward to speaking with you next quarter. So thanks everybody.

Thank you.

Thank you.

This concludes today’s conference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful rest of your day.