Greetings, and welcome to the Boxlight Corporation First Quarter 2019 Earnings Conference Call. It is now my pleasure to introduce your host, Stephen Hart of Hayden IR. Thank you, sir. You may begin.

Thank you very much, and welcome to Boxlight's first quarter 2019 earnings conference call. By now everyone should have had access to the earnings press release, which was issued this morning at approximately 8:30 a.m. Eastern time. This call is being webcast and is available for replay. In our remarks today, we will include statements that are considered forward-looking within the meaning of securities laws including forward-looking statements, the future results of operations, business strategies and plans. Our relationships with the customers, market and potential growth opportunity. 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 and uncertainties and may cause the actual results to differ materially from the forward-looking statements. A detailed discussion of such risks and uncertainties are contained in our most recent Form 10-Q, Form 10-K and 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 in use in combination with GAAP results provide us with additional analytical tools to understand our operations. We provide reconciliation to the most directly comparable GAAP financial measures in our earnings press release, which will be posted on our Investor Relations section at our website at investors.boxlight.com. And with that, I'm pleased to hand the call over to Boxlight's CEO, Mark Elliott.

Thank you, Steve, and a good morning, everyone. We're are very pleased to speak with you all again building off our very productive and successful 2018, we repositioned for favorable 2019 and beyond as K-12 classrooms continues to evolve of interactive learning technologies and our products and services are at the forefront of this technology transition. The first quarter is seasonally our slowest revenue quarter and not a predictor of full year performance. The decline from Q1 2018 was some large contracts, that fulfilled in 2018 and several projects that were delayed in 2019. We do reaffirm our guidance for 2019 of 25% organic growth to $47 million. The health of our business should be managed over the entire year, including the stronger second and third quarter. Over the past three years, we've grown our annual revenues from $20 million to $26 million to $38 million and we believe we're better positioned to grow today that at any time in our history. Our reseller partner network is a strong as ever and coupled with our seasoned management team, strong sales force and continued product development, enables us to deliver our best-in-class and award-winning interactive technology solutions with education market globally. We've had a several new reseller progress this year, including SNL Integrated Systems [ph] in Georgia, Florida and Alabama, InterCore in Wisconsin and Bahwan CyberTek in Omaha. We welcome our new partners and thank them for their confidence in our company to best service their respective market. Additionally, we strengthened our relationship with several key national resellers including Troxelll, our Technology Solutions [ph], CDWG and other strong regional partners as we -- that competed for several of the most significant opportunities across the country. We truly have the strongest network of partners in the industry and we consider them an…

Thank you, Mark. My comments today will focus on Boxlight's technology innovation and development, our M&A strategy including our recent acquisition of Modern Robotics, our $4 million investment from The Lind Partners and other investor focused developments. As Mark stated, our complete solution with integrated hardware and software are the backbone of our product offering and key to our differentiation. Our ability to innovate is a critical element of our future strategy to emerge as a global leader and provider of the interactive technologies for education. We've had several significant product introductions in recent months, new solution launches included, Boxlight NDMS, MimioStudio12, Boxlight unplug'd, MimioInteract, and MimioCloud to name a few. Additionally, on March 14, Boxlight closed acquisition of Modern Robotics for total purchase price of just under $1 million with consideration of primarily Boxlight common stock. Modern Robotics are the creators of MyBot, a powerful and innovative K-12 ecosystem and robotics program that help students from preschool to high school, develop skills in a passion for programming and robotics. Through the cohesive software platform and innovative robots, educators receive an out-of-the-box solutions complete with a robust curriculum, STEM lessons, tutorials and videos. We're excited to extend our offering in a high demand STEM and robotics market by offering the Mimio MyBot solution. Over the next 12 months, we expect to generate over $2 million in robotics and programming revenues for the gross profit margins greater than 50%. Additionally, as Mark stated, our services division was awarded a contract with Clayton County, Georgia for $860,000. We will see continued traction with our services division and expect them to produce as much as 10% of our total revenues by 2020 with gross profit margins greater than 60%. We've committed to complement our organic growth through strategic and accretive acquisitions and we're delivering on that promise. Our success with STEM solutions, improved software strategy, growing international revenues and increased service offerings are concrete examples. We continue to target acquisition opportunities that either increase our worldwide distribution or add a new technology solutions opportunities that complement our integrated solution suit and increase our gross profit potential. We expect 2019 to bring additional acquisition opportunities as we look to continue to expand our reach globally and enhance our comprehensive schools suite. In March, we closed a $4 million investment from The Lind Partners in the form of a convertible note with a 24-month maturity and a fixed conversion price of $4 per share. With this investment, we feel, we're adequately capitalized to execute on our 2019 plans and this investment will bridge our operations to positive cash flow. With that, I will now turn the call over to our CFO, Takesha Brown.

Thanks, Michael. I will now review our Q1 2019 results. Revenue for the 3 months ended March 31, 2019 was $5 million, a decrease $1 million or 16% compared to $6 million for the 3 months ended March 31, 2018. The decrease is primarily attributable to the fact that in the first quarter 2018, the company fulfilled a couple of large projects, which resulted in an increase in sales for Mimio Teach projectors and panels. In addition, there were certain projects that were delayed during the first quarter, but they're still expected to be recognized in 2019. Gross profit for the 3 months ended March 31, 2019 was $1.6 million an increase of $0.1 million compared to $1.5 million for the 3 months ended March 31, 2018. The resulting gross margin was 31.6% for the 3 months ended March 31, 2019, compared to 24.7% for the 3 months ended March 31, 2018. The increase was attributable to a shift and product mix to include higher-margin products and services revenue and a decrease in freight cost. General and administrative expenses for the 3 months ended March 31, 2019 was $3.8 million, an increase of $0.6 million or 18% compared to the $3.2 million for the 3 months ended March 31, 2018. The increase resulted primarily from an increase in salary expense primarily as a result of new acquisitions in 2018. Research and development expenses for the 3 months ended March 31, 2019 was $0.3 million, an increase of $0.2 million or 155% compared to $0.1 million for the 3 months ended March 31, 2018. Research and development expenses primarily consist of cost associated with the development of proprietary technology. The increase was due primarily to research and development contractors and salary expense. Other income or expense for the 3 months ended…

[Operator Instructions]. Our first question comes from the line of Brian Kinstlinger with Alliance Global Partners. Please proceed with your question.

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

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

So essentially there's an RFP our there -- a new RFP out there right now that highlights you and Troxelll? And as soon as that’s awarded with a new funding?

Yes. Well the RFP's already been added and it's been in and approved by the selection group and so now they've taken it to our channel partner, Troxell, and they said this is what we want to do and here is the agreement that we have with you that we will include in the submission package to the Board on May 28th. So it's there, it's done now it's just ready to be approved, and they want to start deploying immediately in June. So they will be looking in installing up to 1200 classrooms before the end of August. So it's a real strong endorsement. I mean, the pilot they went through is like a 15-month pilot with everybody you can imagine, where you had to have five of our products there and they rotated them across multiple schools and things that they did extensive, extensive evaluation and out of that they decided that we want the best solution to meet their requirements and so than they did, the first RFP, which was specifically for back in August, they had a fund of 150 classrooms and that's what they were deploying gas, but when the referendum passed across the entire county there, then that's when they decided that they need to pull it back and redo everything to get the legal things in place so they could purchase this for much larger scale deployment. So it's a good thing for Boxlight and our partners, did some of our first quarter revenue.

Yes. And then, maybe you can size the Charter School for Applied Technology's contract as well as the Federal Purchasing Contracts maybe in dollars value. And then, on the Federal Purchasing Contracts, is Boxlight a sole source vendor? And is it then IDIQ or G-Vac where there's no commitments, but they buy under these -- the vendor at a pre-agreed upon prices?

Yes. Yes, there was buzz that came out and they were selected, we were selected in those categories, but the Colorado has a cooperative purchasing agreement. They have vendors present, they selected and they came up with the best value and in that product, our products that we outline are interactive, flat panel, projectors and things like that were in that category. So now in Colorado and Michigan, and we also have one in the prior year in Ohio, a similar arrangement there. This is a buying vehicle that the schools can go to this contract and purchase without having to go to bid. So it's a very advantageous purchasing agreement and it's very prestigious for us and then selected in those areas right there and in the Latin American countries, like Chile and Peru and in Puerto Rico, it's a similar arrangement. They have a catalog that goes out, but they select who is going to be in the catalog and that then allows them to buy off of that.

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

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

Okay. And then, on the last conference, you talked about, I hadn't heard that one, but on the press release, you remarked about Chesapeake Schools, maybe size, scope and duration of that contract if you've already said, I might have missed it.

Yes. Chesapeake is 39,000 student school district there and so they're going to be around 2000 classrooms and they will be deploying that over some period of time and typically it's going to be -- it's going to vary depending on their rollout schedule and things like that. But this is the buying vehicle that we use and we will start working with them as they come up with their deployment schedules. But typically, you know, we've had districts so Clayton County was the good example. The original RFP and purchasing agreement that they came out with was to deploy 3200 classrooms over 2 to 3 years after putting them in, they decided that they wanted to do that in six months and so that was a really good thing right there for us as a company, but we had others that have had five year plans there and they stick to the five year plan. So it really depends on the budget, the requirements and the replacement needs of the district. So the good side is, as once they order and is predictable and we sit down with them with our channel partners to look at the rollout schedule and how they're going to be deployed.

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

No. It would be approximate 2000 classroom over time there and $2000 to $3000 classroom depending on whether just go with the flat panel or whether they are having our peripherals and those are all possibilities for that.

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

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

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

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

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

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

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

Well, San Diego was certainly one that we had -- that moved out. We also had Shelby County of Memphis, Tennessee that are selected at a bid that went out right there, but they had a new superintendent search that started and so they decided to move things out from there. North Hills School District had an RFP in Q1 but then they decided to reissue it. Now we have since won that RFP as a matter of fact, we got a purchase order from Troxell for a 176 classrooms there. So those were some that had an impact right there where they just moved out and they had changes and there are administration right there, that could have moved in and that we accounted on for the first quarter, they had moved out, but we continued to believe that we're going to get them. So certainly, San Diego is in there, Shelby County is looking very, very positive and in the North, we've already got them. So those would have been the swing in and what we were looking at but they are moved out and we're very confident about that.

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

Well what we've seen Allen, is that there have been several competitors that have dropped out of flat panel market. There are companies like AVER and PLOMO and HoverCam [ph] and also In-Focus. So significant companies they decided that the cash requirements for this were more than they initially asked for and so we then dropped in that tail because there is nothing worst in the market than to have a desperate competitors. So with them going out, that put a little stability in there and we monitor all the bids that come out, we know the range that we need to be in. With the fact that we have an integrated solution that gives us some competitive advantages right there because people are prepared to pay more value for our products there because we can add in the peripherals without all other issues. And they also -- we protect their investment and their existing lesson plans because we're doing incredible job of being able to take lesson plans, developed by our competitors, primarily Smart and Promethean and that we can operate those. Many have had to survive and coexist with Smart and Promethean for years and so their software is incredibly capable of doing that. So what that means is that we provide districts the advantage of protecting what they develop, we can also allow them to do a better job in training because they need to know one platform and it makes it easier for them to recruit features into the districts. So these are competitive advantages that we offer that others don't, that gives us a margin advantage there. And they're very, very easily defined as far as what the cost are and the disturbance and unhappiness they create with teachers that spent 10 or 15 years developing lesson and have them be told that they're going to have to change that and go to another environment and it's not something they want to do. So we provide them that capability and then we provide them the base capabilities and software to allow them to also grow in new environments such as Google and other integrations. So that's the thing and having competitors drop off has been a good thing for us. We've had multiple channel partners I mentioned InterCore, was one that was competitive channel partner in Wisconsin and so they have already picked our stuff and we're going and having others approach us with the same thing and we're competing with a major bid right now in Wisconsin with InterCore as our partner up there.

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

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

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

So we still have a very strong pipeline of M&A opportunities. We consistently have companies coming to us, we track more so now than in the past because we're gaining more market share in the industry and so we're a little bit more visible, but also we actively go out and look for opportunities. We do plan on acquiring additional companies this year, we don't have any specific guidance on that but we're also very selective, right as we're looking at acquisitions. You can look at the acquisitions we closed over the last 12 months, that each of those four acquisitions were, perhaps small in size, but very meaningful to our total solution suite in a longer-term strategy and so as we're looking at new acquisitions and we have the same methodology where we're looking at companies that we think can improve what we have, not necessarily shakeup what we have or dramatically change our trajectory. We're just looking for things that augment what we're already doing. And so may be keeping an eye, we're definitely going to have more acquisitions in the future and think of those acquisitions similar to what we've done in the past. And specifically, I would say looking at additional distribution we have talked about and also additional technology opportunities or software opportunities.

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

A lot of my questions were already addressed, but I just wanted to get back in to the delays that impacted the first quarter results. I know that going back to the third quarter of last year, you had some delays and it really give you a great fourth quarter, as a matter of fact, the record fourth quarter. So in regard to the first quarter delays, how do you think this is going to shake out as far as a second, third or fourth quarter? Might we assume that a lot of this may show up in the second quarter or do you think that it could be into the third? I just want to get an idea of how much of this is going to break out over the coming quarters?

Yes. And again, the first quarter is really tough quarter for anybody in the education stage right there and it is really not a good predictor of the future right there. I talk to several of our -- all of our key channel partners out there and they had a similar delays where they are in and however, they went on to comment that the business and the business of their people is at all-time high that they are spending a whole lot of time now and there's a lot of interest there across the team. The reason that I've heard that I think makes sense for some of the delays is that there is a big replacement market that's happening right now in the range of white boards and projectors and there's also a lot of people that are looking at chrome books and things like that and these are major deployments. And so they are now analyzing their requirements and they're putting them together. And so they are looking at things like this, whereas in the past, they would've just been buying in the first quarter and so now they're grouping them together and that's why we're seeing bigger bids that are coming out in larger deployments. So we've got a lot of activity, our pipeline is really, really strong. Some of these opportunities, I'd love to be able talk about but we can't for competitive reasons and other things like that, but the delays in the first quarter where I think, that's the biggest reason I can come up with, there has been a lot of activity, a lot of our channel, salespeople and our channel partners that have been busier than they've ever been and they're proposing and presenting and getting exposure to these. But I think it's because there's a lot of technology that's now in play. Schools that've had interactive white boards for 10 or 15 years now are saying, it's time to replace them and so that's part of it and they're looking at the tablets and other devices that tie into that as well as peripherals and so it's a big decisions. And they're grouping them together and doing a little more scrutiny, but they have and will continue, I believe, from our pipeline and everything, we're not losing them they're just moving forward and they will be deployed this year.

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

Yes. Modern Robotics is in included in that, not a tremendous amount this year, I think we're only looking at $1 million to $2 million out of them. We've got a lot of answers in this everywhere from this and if you look at STEM as a category in general, that's the hottest market period, everybody is talking about that globally for all the right reasons and robotics is the most visible approach there. So we've got companies like Lego's and others that have been out there. We think that we have a solution and the CEO of Modern Robotics was a very strong insider within the Lego's Group, he provided sensors and devices to the Lego's teams. So he understands Lego and he understands the strengths that they have in the areas that we can focus on to enhance that. One big advantage that we have with the Modern Robotics and our robotic solution is that Lego's sales direct in the United States and a lot of other developing countries and our channel partners are looking for a strong cohesive system that ties into this. We're also looking at developing interfaces into our existing lab desk [ph] product that we have to allow us to integrate between the two products there and give us a competitive differentiation right there. So Modern Robotics is going to be a big contributor. I was at a recent conference in Austin, Texas where you have 30 minutes with respected districts, their CIOs and technology and academics people and every one of them were incredibly interested in our robotics approach there and they [indiscernible] at the district level and at the federal level to ensure that we're doing the right things there. And we're also enhancing them with our EOs group, our professional development team, developing, training and curriculum, we can complement that. So we think that we're going to have a very, very powerful solution there with the Modern Robotics solutions.

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

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

Fair enough. Just one final question, I was hoping you could talk a little about what you believe the potential for sales of your products in the UK looks like? Since you asked acquisition of Cohuba?

Yes. We had the guy that was in charge of the Cohuba Group and he was in charge of product management for Promethean and he's with us and he's working on our product management team now over several key areas we got, we recruited [indiscernible] from Promethean and from another competitor over there and he has built up a team there that's from competitors and so we've an built the infrastructure, we got the product mix in place there, we've been doing a lot of marketing over there with them. We've brought in several key channel partners in that market and we've been winning. We won the largest academies, which is similar to Charter School program here in the United States, Academic Education Trust. They've got 60 schools there and they've selected us. So we're very optimistic about what they're going to be able to do. They're not just in the UK, but there also in EMEA. And we've seen them through the trade shows and the conferences and the people that we brought onboard, they were part of other organizations and competitors. They're bringing in their pipeline and their channel partners with them. So they're on track and we got an experienced team there and we've got the infrastructure and the product mix that they need and also, the messaging because Cohuba doesn’t really have the complete total solution approach there and we've given them that as a foundation.

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

[Operator Instructions]. Our next question comes from line of Hunter Diamond with Diamond Equity Research. Please proceed with your question.

So just a quick question, I looked at the operating cash flows turn positive this quarter, I'm just trying to understand and given the recent formula in our financing, how are you guys thinking about the financing options you have and in terms of, how much financing you're looking to pursue given the recent cash flow turn positive. Do you expect that to continue and just your thoughts on the financing and overall investment back into the business?

Yes. So Hunter, good question. So the positive cash flow operation is a function, of course, changes in other operating assets and so we did have a loss of course in Q1 and adjusted EBITDA loss. So I think that's just kind of a fluctuation that you shouldn't expect going forward. As far as financing, we did provide guidance that bring in $4 million from The Lind Partners, which is going bridge us to positive cash flow. And so we don't have any plans to raise additional capital at this point in time. Other than, perhaps, looking at some options that have a better debt partner, but as of now, we don't have any other plans for new financings. As far as what you should expect going forward, we also provided guidance and we commit to this that we plan on being positive cash flow and also starting to produce positive EBITDA or adjusted EBITDA, I should say, this year's as well. And you're really going to say that come to fruition starting in Q2, Q3 that's a big buying season, that's when we have the large revenue numbers and we plan to generate sufficient revenue that offset our operating expenses and bring us to that positive adjusted EBITDA.

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

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

Ladies and gentlemen this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.