Boxlight Corp (BOXL) 2021 Q1 法說會逐字稿

Thank you, and welcome to the Boxlight First Quarter 2021 Earnings Conference Call.

By now, everyone should have access to the press release issued this afternoon. This call is being webcast and is available for replay.

The remarks today 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, customer relationships, market trends 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 the company's most recent Form K-10 and Form 10-Q and other reports filed with the SEC. The company undertakes no obligation to update any forward-looking statements.

On this call, management will refer to non-GAAP measures that when used in combination with GAAP results, provide additional analytical tools to understand the company's operations. The company has provided reconciliation to the most directly comparable GAAP financial measures in the earnings press release, which will be posted on the Investor Relations section of the company's website at investors.boxlight.com.

And with that, I will hand the call over to Boxlight, Chairman and Chief Executive Officer; Michael Pope.

Good afternoon, everyone, and thank you for joining our first quarter 2021 earnings call. We completed another record quarter with $48 million in customer orders, $33 million in revenues, 28% gross profit margin, as adjusted for acquisition-related purchase accounting and $1.6 million in adjusted EBITDA, again, outperforming our guidance for the quarter.

We also reported as of March 31, $21million in backorders, a strong balance sheet with $10 million in cash, $23 million inventory, $22 million working capital and $47 million in stockholders' equity.

Our triple-digit revenue increase over the same quarter last year is a testament to our winning expansion strategy through both organic growth and strategic acquisitions. We continue to benefit from unprecedented market expansion, particularly in the education sector as schools return to in-class learning and are utilizing increased technology budgets supported by substantial government funding programs.

Given our current order volume and growing sales pipeline, we are optimistic on the second quarter and expect to report revenue of $39 million and adjusted EBITDA of more than $1 million, resulting in an expected first half of 2021 with $72 million in revenue and greater than $2.6 million in adjusted EBITDA.

In addition to our remarks today, I invite you to reference our shareholder letter published on April 27, which provides a more detailed accounting of our progress to date as well as insights on our growth strategy. While receiving record order volume, we have experienced some supply chain challenges, including interruptions to inventory production schedules as a result of component shortages, along with delays in the shipping and receiving of goods. We have also been managing cost increases for both hardware and shipping, which has resulted in reduced gross profit margins. These are global challenges and are not unique to us.

However, we believe we are managing better than most by extending our production planning and where we can, increasing prices to our customers. As of today, we have scheduled production through the end of 2021 with anticipated lead times of 4 to 6 months on certain hardware solutions.

On March 23, we acquired Interactive Concepts, our distributor in Belgium and Luxembourg, extending our footprint in Europe. This transaction was part of a broader strategy to both improve our profit margins and maintain stronger relationships with our reseller channel and end users in that territory.

Year-to-date, we published 18 customer case studies highlighting successful technology implementations, including in Canon City schools in Colorado; Shelby County Public Schools; and Trinity Parish Schools in Kentucky; The Ridgeway School; and the British Academy in the U.K. and San Agustín de Bilbao Center for higher studies in Spain, among others.

These case studies highlight the positive impact that our technology solutions have on learners, including students with special needs, the strong future of STEM solution integration in classrooms and the benefits of display technology for higher education and corporate environments. We will continue to produce a steady flow of educator and corporate success stories featuring our breadth of solutions.

In early March, we announced both our Boxlight Virtual Classroom in Atlanta and Clevertouch Gallery in Central London. Our Boxlight Virtual Classroom is a fully staffed class and space used to facilitate customizable live, virtual education experiences utilizing our full solution suite. The virtual space is also used to host weekly education focused webinars to help educators understand how our solutions can best be used to optimize learning.

Our Clevertouch Gallery in London showcases our state-of-the-art collaboration touchscreens, commercial displays, digital signage and cutting-edge LED video wall. The gallery features a boardroom, unified communications huddle space, informal meeting areas and hot desking space for partners and colleagues.

Also in March, we launched Clevertouch Academy, an expansive hub of resources, tutorials, lesson plans, virtual self-pace training and detailed downloads designed for educators, trainers, trade partners and engineers.

Earlier this week, we announced our certification as a Google service partner in education with specialization in professional development for the U.S., Europe, Latin America, Australia, and New Zealand.

During Q1, we had some significant updates to our software platforms, including the latest releases for MimioConnect and LYNX Whiteboard, which is now available in all major App stores, including Google Play, Samsung, Amazon, and Apple.

MimioConnect has been enhanced with video and audio communication and additional classroom management tools. Our new Clevertouch Live platform is an ecosystem, allowing users to deliver and manage digital signage, messaging, alerts, and customizable user interfaces across any network.

Our Mimio Touchscreens also feature Mimio Message, our digital signage platform and Mimio Market, our education app store.

In addition to the updates to our platforms, we have also developed our next generation of interactive displays with several significant technology updates, making them the most advanced on the market, with anticipation to begin shipping later this year.

As we continue to expand resources for educators, companies, and partners, we are receiving substantial recognition from the EdTech and AB Industries for our innovation. During this year, both our MimioConnect blended learning platform and MyStemKits content earned awards from tech and learning magazine for best remote and blended learning tools and the primary and secondary school categories.

Additionally, our Robo 3D printers and MyStemKits curriculum and our MimioClarity Classroom Audio System were named as EdTech finalists by EdTech Digest.

Clevertouch was shortlisted at the Innovation Awards for Best Place to Work, Best Business Growth and Best Communication and Collaboration Product for the UX Pro with winners to be announced next month.

As school systems identify needs for their teachers and students making -- many school systems are looking to government relief funding to purchase resources, materials, and training.

In the U.S., to assist school districts with accessing federal funding, such as that provided by the CARES Act, the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act, we have developed and promoted support content and services. This includes our newly released relief funding guide and expertise of our internal funding team to help decision-makers navigate the process of acquiring this critical funding.

I am extremely proud of our progress through Q1 of this year, led by our tremendous leadership team and talented, hardworking employees. We are committed to our loyal partners and support of shareholders, and we will continue to drive results and realize our mission to be a global leader in providing interactive technologies.

With that, I will now turn the call over to our President, Mark Starkey, to provide additional color on our sales efforts for the quarter.

Thank you, Michael. Q1 was certainly a record quarter for us, and I would also like to take this opportunity to thank all of our staff and our customers who have helped contribute to our success during the quarter. As Michael stated earlier, we booked over $47 million of orders during -- from our partners. That represents a 528% growth in order intake year-on-year and is a record for Boxlight.

Some of our key orders in the U.S. included $8.7 million from Tierney, $4.2 million from Central Technologies, $2.4 million from our distribution partner, D&H, $2.2 million from Trox, $2.2 million of orders from Digital Age Technologies and $2 million in Data Projections.

Whilst many of our largest orders were from U.S. partners, it is worth noting that we took over $21 million of orders from partners outside of the U.S., predominantly in EMEA. This highlights the quality and diversity of our customer base, which will be crucial as we develop and expand our business over the next few years.

On the 26th of April, 2 of our largest partners, Tierney and Trox merge to become one organization. This is a very significant opportunity for Boxlight because Tierney currently has exclusive rights to sell Clevertouch in 49 of 50 states in the U.S.

We are discussing the extension of our Clevertouch exclusivity contract to include Trox across 49 states and Canada. This means that once an agreement is reached, the number of salespeople who are actively selling Clevertouch in the U.S. will increase substantially from about 40 heads to over 200 heads. We expect the agreement to be finalized in the next few weeks. This automatically gives Clevertouch true sales presence across the U.S. and Canada.

In terms of end users, we had another quarter of fantastic wins across the globe. One notable win was the Ministry of Defense in the U.K. The MOD purchased more than $1.4 million of Clevertouch touchscreens to use throughout their bases in the U.K. They selected our screens for 2 main reasons: firstly, the ability to totally lock down our screens and use them in a very secure environment.

And secondly, because of the flexibility of the LYNX software, allowing the MOD to get the maximum benefit from the Clevertouch touchscreens.

The Americas region for Boxlight had several key wins in Q1 of 2021. Brighton school districts in Michigan purchased more than $1.1 million in Boxlight product, including 330, 86-inch panels and our MimioClarity Audio System for each classroom.

Our key reseller in Tennessee, Central Technologies continues to do well throughout the state, purchasing more than $2.6 million in Boxlight products in Q1, including a major win in Warren County.

Our strategic partnership with Samsung has continued to progress this year. We recently received our first substantial order from our MimioConnect software from Samsung U.S. for approximately $1 million. Furthermore, Samsung has agreed that every interactive panel that they sell into the U.S. education customers will automatically include a MimioConnect license.

We are also in discussions with Samson U.K. and other parts of EMEA about similar opportunities for our MimioConnect solution and hope to announce further wins shortly.

In addition to the software sales, we are also committed to selling high volumes of Samsung hardware under our partnership agreement, including noninteractive displays and look forward to providing additional updates later this year.

In summary, Q1 was a very strong quarter in terms of order intake and revenue, and our solutions are getting a lot of traction in the market. We continue to develop our key partnerships and alliances across the globe, and I look forward to another record quarter in Q2.

With that, I will now turn the call over to our CFO, Patrick Foley.

Thanks, Mark, and good afternoon, everyone. To further expand on what you've already heard from Michael and Mark, I would like to add a few figures to provide some context to Boxlight's international operations.

So revenue by country and region. Total revenue in Q1 was $33.4 million, of which EMEA was 54% of or $18.1 million of which the U.K. represented 56%. The U.S. was 42% or $13.9 million, the rest of the world, 4%, $1.4 million, which was mainly Australia and South Africa.

In terms of customers, the top 10 customers represent approximately 47% of total sales in Q1, with the single largest customer at 8%, and these are based across a number of markets, namely U.S., U.K., Denmark, and France. Nearly 2/3 of total sales are covered by the top 20 customers, approximately 64%, which is pretty similar to our Q4 2020.

For our sales, product mix and gross margin, in Q1, displays remain the largest proportion of total revenues at 78%. These are largely sales of interactive flat panel displays with related accessories generating a further 9% and the balance coming from software, services, and STEM solutions.

Adjusted gross margin for the quarter was 25.6%, and the IFPD margin was approximately 26%, which would have been slightly higher. However, as reported by Michael earlier, increased global shipping costs where we are seeing a ForEx normal rate have reduced margin by up to 4 percentage points. We anticipate the higher costs will remain for the next 2 quarters.

Screen sizes and their splits. In Q1 2021 within the education sector, 77% of all interactive displays was 75-inch and 86-inch panels, which follows the trends we are seeing with larger screen formats.

I will now review our first quarter results. Our financial results for the 3 months ended March 31, 2021, were as follows. Revenues for the 3 months ended March 31, 2021, were $33.4 million as compared to $5.7 million for the 3 months ended March 31, 2020, resulting in a 484% increase due primarily to the acquisition of Sahara in September 2020.

Gross profit for the 3 months ended March 31, 2021, was $8.6 million as compared to $1.6 million for the 3 months ended March 31, 2020. The gross profit margin for the 3 months ended March 31, 2021, were 25.6%, and the adjusted net effect of acquisition-related purchase accounting, the margin was 28% as compared to 27.9% gross margin as adjusted and reported for the 3 months ended March 31, 2020.

Gross margins have been adversely impacted by up to 4 percentage points due to increased freight and customs costs caused by supply chain challenges associated with the effects of the COVID-19 pandemic.

Total operating expenses for the 3 months ended March 31, 2021, were $10.6 million as compared to $4.3 million for the 3 months ended March 31, 2020, the increase primarily resulted from additional overhead costs associated with the acquired Sahara operations in September 2020.

Other income expense for the 3 months ended March 31, 2021, was net expense of $3.1 million as compared to net other income of $0.7 million for the 3 months ended March 31, 2020. The increase in other expense was due to $0.6 million of increased interest expense associated with increased borrowings, $1.9 million of losses recognized on the settlement of certain debt obligations that were exchanged for common shares. Fewer gains were recognized on the settlement of accounts payable, which were $1.1 million lower year-on-year and $0.3 million of additional losses that were recognized in 2021 upon the remeasurement of certain derivative liabilities associated with common stock warrants.

The company reported a net loss of $5.2 million for the 3 months ended March 31, 2021, as compared to net loss of $2 million for the 3 months ended March 31, 2020.

The net loss attributable to common shareholders was $5.5 million and $2 million for the 3 months ended March 31, 2021 and 2020, respectively, after deducting fixed dividends to the Series B preferred shareholders.

Total comprehensive loss was $5.4 million and $2.1 million for the 3 months ended March 31, 2021, and 2020, reflecting the cumulative effect of foreign currency translation adjustments on consolidation, with the net effect in the quarter of $0.3 million loss and $0.1 million loss for the 3 months ended March 31, 2021 and 2020, respectively.

The EPS loss for the 3 months ended March 31, 2021, was $0.09 loss per basic and diluted share compared to $0.16 loss per basic and diluted share for the 3 months ended March 31, 2020.

The EBITDA loss for the 3 months ended March 31, 2021, was $2.4 million as compared to $1.3 million EBITDA loss for the 3 months ended March 31, 2020.

Adjusted EBITDA for the 3 months ended March 31, 2021, was $1.6 million as compared to a loss of $0.7 million for the 3 months ended March 31, 2020.

Adjustments to EBITDA include stock-based compensation expense, gains and losses recognized upon the settlement of certain debt instruments, gains, and losses from the remeasurement of derivative liabilities and the effects of purchase accounting adjustments in connection with acquisitions.

At March 31, 2021, Boxlight had $10 million in cash and cash equivalents, $21.8 million in working capital, $139.7 million in total assets, $20.6 million of debt, $47.4 million in stockholders' equity, 56.8 million common shares issued, and outstanding and 3.1 million preferred shares issued and outstanding.

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

(Operator Instructions) And it looks like we have a question from Brian Kinstlinger.

This is Jacob on for Brian. Clearly, your North American operations are benefiting from the federal funds. Can you talk about your international positioning? And what are the growth rates like? And how much faster do you think you can grow?

Yes. So thanks for the question. This is Michael. I'll say a couple of things, and then Pat or Mark, feel free to jump in. So when we look at the globe, the U.S. is absolutely our #1 growth market. We're seeing more spending happening in the U.S. than we are in other countries. And so we have a tremendous focus on the U.S. But there are other countries around the world, including throughout Europe that are also seeing high growth. Germany would be one that we talk a lot about. Other areas maybe a little bit more static.

But in general, when you look at the globe as a whole, minus China, which is the way that we look at the opportunity, we're seeing double-digit growth, and that's true in the U.S., and that's true in other countries in aggregate around the world. And so there's absolutely opportunity all over.

Now as far as federal funding, they're substantially more federal funding in the U.S. has been applied. But there are other programs internationally as well, where we're seeing our federal funds as well available for school systems in other countries.

But again, I would say, absolutely, U.S. is #1 market. Beyond that, it would be Germany and certain other territories throughout Europe and then other territories around the world.

Yes. I mean just a bit more color on that. In Q1, we had -- in Germany, specifically, we had 73% year-on-year growth in revenue, okay, so significant growth rates.

And you -- given the timing of some of the federal funding package in the U.S. and talked about maybe in some other countries around the world, one being recent, do you expect the seasonality more -- be more pronounced this year, meaning in the second half of the year might be more -- might account for a significantly higher percentage of annual revenue?

That's a good question. I think we're still figuring that out. If the federal funding that's being made available, if that's spent more quickly, then I think, absolutely, that will be the case. But I think it's yet to be seen how quickly some of these funds will be spent.

I will say that we are seeing spending now from the CARES Act money, and you'll remember the CARES Act went in play in March of last year. And we're receiving orders now where schools a year later are spending that CARES Act money. And that CARES Act money, that was part of a $2 trillion CARES Act with 30 -- about $31 billion that was allocated for education.

You'll remember that in December, there was another COVID relief act that hit. That was about $82 billion for education. And then in March, the most recent stimulus package, that was $170 billion for education.

So we're definitely going to see a lot more money flowing in. I would anticipate the vast majority of that is going to lag into next year. But we do expect to have, with seasonality, a stronger second half of the year than first half of the year. That's for certain.

Okay. And one more, and I'll hop back in the queue if I have any more. Can you talk about the supply chain? Is there any quantifiable impact. I think you mentioned about 4% on gross margin, but any impact that you're seeing on revenue and orders and then continuing gross margin. And also on building inventory, is there any more color you could give on that? And how long you might expect this to last?

Yes. So let me tackle the latter part of the question, and then I'll cover the rest. So as far as timing, it's uncertain. It's a global problem, as we mentioned in our remarks. It's affecting those in our industry as well as many outside of our industry, anybody that utilizes chips and components and for technology and even metals and plastics, we're seeing potential shortages also.

I will say that we're managing it the best we can. We're ordering out way in advance. We mentioned in the remarks that we've ordered out until the end of the year, so that's well beyond where we normally would order out. We're seeing lead times of 4 to 6 months, and so we're planning accordingly.

It has not affected us in a major way to this point in time in deliveries. There have been some slippages of deliveries. But generally, we're meeting our delivery time frames. We believe that's still going to happen in Q2, that we'll meet our time frames.

There is a little more uncertainty around Q3, Q4. But like I said, we're doing everything we can to manage that.

As far as impact in orders, we're not seeing an impact in orders. We're seeing a tremendous amount of orders. And I think if we're better off than the competition, we'll be put in vantage point and then advantageous to the extent, because I think we may be receiving some orders that maybe could have gone somewhere else.

And then as far as financial impact, you heard the 4%, that's related to shipping costs. We are seeing also additional cost of goods in the cost of our technologies, and that's in the way of increases in prices on components and increases in the bill materials from our manufacturers. But we're trying to offset that as best we can. In many cases, we've been able to increase prices to our customers, and that helps offset that and negotiate the best we can with our manufacturers.

And you can see in Q1, our gross profit, when you adjust for those purchase accounting adjustments, we were 28 points, which we're happy with. That 28% gross profit margin, that's compared to, you'll remember, in Q4, we had about a 26.5% comparable gross profit margin.

So we're trending in the right direction. We think, as some of these concerns around increase in costs, around freight and materials, as those start to normalize, we ought to gravitate more towards around that 30 points gross profit margin.

And Michael, I would just add to that, also the points in terms of supply chain and in terms of what we're doing in terms of preplanning. So in terms of our working capital, when you look on the balance sheet, you'll see the shift actually moving into our increased inventory. So actually, getting prepared for that.

So also -- as Michael mentioned, we have kind of like a lead time around 4 to 6 months, so we are actually preplanning against that and actually stocking accordingly.

(Operator Instructions) We'll take our next question from Jack Vander Aarde.

Okay. Great. Michael. Solid results, strong guidance. A couple of questions. I'll start with Michael. So in your recent shareholder letter, you indicated an expectation for at least $40 million of custom orders, and you raised your revenue to over at least $31 million of revenue.

But clearly, based on today's results, you comfortably exceeded both of those targets, over $47 million of orders and over $33 million of revenue. Can you just maybe speak to some of the drivers that led to that positive delta or upside surprise?

Yes, yes. So a couple of things. One, we are seeing increased demand even beyond our internal targets in the industry, and that's a function of additional focus on technology buying. Some of that is because a lot of classrooms are going back to traditional or hybrid learning. That puts more focus on it.

There's also a lot more political focus on technology in the classroom. But then also, there's an immense need for educators and students to have technology to be able to return to learn and bridge learning gap and be effective. So that's part of it, just a general industry.

On top of that, you heard us talk about federal funding, that also is driving additional demand, knowing that these federal funds are coming, and those funds are expected to be utilized towards these technologies that we're providing.

And then I would add on top of that, we're a healthier company now than we've been in the past. We had some challenges. If you go back a few quarters, you know, Jack, because you followed us for quite some time. And so just by nature of being a healthier company, I believe there's a lot more confidence from end users. There's a lot more confidence from our partners. We sell through reseller partners, and so a lot of those partners now believe in us. And they're standardizing more in our solutions.

And then also, we have a steady stream of supply of solutions, so that provides, again, more confidence from the partners. And then it comes down to just the solutions themselves. We have the best solutions in the industry. We're telling that story. We're out there. We're sharing that. We're investing more in our sales team, and all of that is generating results.

I would say, in general, the uptick in additional orders, the uptick in sales as a result of those mix -- that mix of items, now from when we provided guidance to the sales figures coming in higher, that came down to us reconciling towards the end of the quarter and figuring out what those numbers would be, and we were trying to be conservative when we put the numbers out there.

And I was pleasantly surprised that we came in well above our initial numbers we were looking at. So that was just a nice surprise. But we knew that we were in a good place with the guidance of $31 million of revenue and greater than $40 million in orders.

And Michael, I'll just put a bit more color on that. We're winning. We are winning -- wherever we're playing, we're winning. I think that we're really investing heavily in the sales team. They're being heavily trained. We know we've got the best products, okay. We're winning. And we got the sail in our wind or the wind in our sails, and it's -- we'll get a lot of good results. So we're winning a lot of good orders.

Yes.

Got it. Fantastic. I appreciate the deep color there. That's helpful. And then just, if I turn to speaking of federal funding opportunity, and there's only a few questions on this already.

But just how many of your districts are being -- are actively in discussions -- or your channel partners and your district partners, how many of them are you actually working with currently or have ongoing communications? And there's an actual real immediate or pending expected opportunity there to access this funding in all of your districts.

You have so many school districts and classrooms that you're already penetrated and all across the country. Is there -- is this happening universally across all your different territories and districts? Or is it kind of often on here or spotty, I should say, and then ramping up to it?

Michael, do you want to take that? I mean, simply, it's everywhere, right? It's consistent. It's everywhere.

That's right. Yes. So obviously, in the U.S., every district in the U.S. is getting allocation of funds, so they're talking about it.

I would say the majority of those districts have minimal experience in knowing how to access those funds, so they're scrambling to do that. And we provide a lot of resources around that. We have a team that helps those districts access funds and understand how to utilize those funds.

We put out a new guide just a couple of weeks ago, and that's a detailed guide of school districts. They can read that guide and understand more about utilization of the funds and accessing the funds, but we're happy also to provide additional resources beyond that.

Outside of the U.S. and other countries where there's funds allocated, same thing. Everybody knows that the funds are out there and looking to access those funds.

Just a bit more info -- sorry, Jack. So the other key thing to look out in the U.S. is the penetration rate. So the penetration rate of IFPDs in the U.S. is actually significantly lower than EMEA, okay? That means the opportunity for us is significantly greater in the U.S. So that's why we're expecting such significant growth rates from the U.S. side of our business.

Yes, I'm glad you brought that up because that's what I was going to follow-up on is, just in terms of the overall opportunity, how many -- I imagine that if there's a lot of school districts, maybe they haven't been renovated or have newer technology implemented yet into their classrooms. I'm expecting that this could be an opportunity for those districts to actually get some federal funding to actually make that happen, which -- does this open the door then to a lot of new customers coming to you now, a lot other districts that already have in interactive technologies already built into their classrooms that you weren't already helping or servicing in any kind of way, but now because of federal funding, they're coming to you and saying, knocking on your door?

Yes. So there's absolutely some of that. And Jack, I would add, too, there are a lot of districts that were planning on technology refreshes or new technologies in their district, but they didn't have the funds allocated.

And so now that they have this new funding coming, they're accelerating some of those decisions. But I think to Mark's point, a couple of thoughts, I think, are important. So one is definitely districts that don't have the technologies we sell, it's an opportunity for us to sell-in. But also there's large districts that are doing refreshes of technologies they put in play, it could have been 5 or even 10 years ago. And the solutions we're selling with interactive flat panels, various hardware solutions, most of those have about a 5 -- to 7-year life cycle.

And so when you install these solutions 5 to 7 years later, we're doing a major refresh. And if you look at some of the largest districts where we've been selling, like San Diego, we've talked about or Montgomery County or Clayton County in Georgia, or Beaufort County, South Carolina, those were actually refreshes of our competitors' technologies, right, of interactive white boards or other interactive flat panels in those districts. And they're replacing that old technology with our newer interactive flat panels, which are 4K high definition with App stores and other technologies that we're including.

I mean just -- I mean, on average, every single classroom in the U.S. effectively has $75,000 spend. And it's like what they're going to spend that on, and technology is pretty much high up there. And we know we've got a lot of the technical solutions for those classrooms. So we think we're well positioned.

Got it. That's helpful, guys. And then just another question on -- if I shift to second quarter guidance. Very strong guidance, it was ahead of my expectations.

For revenue of 30 -- was it $39 million, and at least $1 million of adjusted EBITDA, just wondering about that adjusted EBITDA number of at least $1 million. How conservative -- or how much wiggle room is built into that just given your comments on the supply shortage of components? And is there -- is that like risk-adjusted for that and maybe some gross margin hiccups?

Just how much cushion are you baking into there? Because given you just did over $1.6 million of EBITDA basically for the first quarter on less revenue. So just trying to figure out if that's a conservative target or not.

Yes. 2 reasons for that, Jack. So one is you're absolutely right. Its risk adjusted for potentially some higher cost around our inventories we're bringing in as well as delivery of those goods.

But then also, we've been focused on broadening our sales team and increasing some of our marketing spend, and we've been absolutely focused on taking market share. And that gives us a little buffer as well for some of the expansion, a little bit of expansion in our OpEx as well.

So it's a combination of those 2, we say at least, right, so there's definitely some room to be much higher than that. And we expect we will be higher than that. But that $1 million was a conservative estimate to provide.

Okay. And then maybe just lastly, in terms of your geographical focus, you've been gaining market shares. Last quarter, you did mention that you took #1 market share in Australia.

Just maybe an update around -- are you making any noticeable or material headwinds? It's only been a couple of months, maybe a month or 2 since we last spoke, but what's the next market share that you see yourself climbing the ladder up the quickest in terms of geographical region?

Do you want me take this, Michael? Or do you want to take that?

Yes. Go ahead, Mark.

Yes. So well, in terms of that data, in terms -- that report, the next one comes out in about 6 weeks' time, so we'll have that shortly. And then we'll be able to share where we are in terms of our actual statistics and market share.

But in terms of where I see the growth and where we're effectively going to take market, I think the U.S., I think Germany, I think the U.K. we're already very strong. I think we could potentially go up to second position.

I'm looking at the volumes that we're doing, the actual quantities that we take, whether we're actually selling IFPDs, and it's really quite staggering. The growth that we're doing in the volume.

So I think really for us, the key targets are taking market share in the U.S., taking market share in Germany and then other parts of Northern Europe. So that's probably the best guide we can give.

That's helpful. And actually, I do have one more question, I apologize. On the Samsung arrangement -- or partnership, this -- it seems like it's starting to finally kick in a little bit here.

Wondering how your second quarter revenue guidance contemplates contribution from Samsung in any shape or form? Is it meaningful? And then also, do you still expect Samsung to really materially ramp into a real revenue contributor during the back half of this year?

Do you want to lead that, Michael, or do you want me to lead?

Yes. I'll say just a couple of things, and I'll have you fill in the gaps. So the answer is, we have not baked in substantial sales at this point into our Q2 of Samsung because we believe the ramp is going to be in the latter part of the year. And we've only, of course, guided to Q2.

We do think it can start to be significant, and we said that in our remarks. A nice movement in the right direction was the announcement we made in our remarks of $1 million in licensing of selling our MimioConnect and other solutions to Samsung and their agreement that every interactive flat panel sold in education, every Samsung interactive flat panel sold in the education in the U.S. will be accompanied with our MimioConnect software. So that's a move in the right direction.

Now the recognition of that revenue, we still need to model that, but it's going to be over a period of time because those MimioConnect licenses are 3-year licenses. And so we'll have to look at how that revenue is recognized. But that was a nice movement to bring in that $1 million of orders of that software platform and our training and some other software and content that we're providing.

So -- but again, I think come next quarter, we should have a better grasp on where we are with Samsung, be able to provide more updates.

Fantastic. It sounds like, there's a lot of -- interested to conservative embedded contributions from Samsung in that guide. A strong second quarter revenue guidance. That's great to hear. I mean there's probably room for upside down the road here, as you progress.

Our next question comes from Chad [Burgin].

And congratulations on the really good quarter for Boxlight. Mike actually, just a quick comment, mainly because I work with federal grants. I just really, really appreciate the approach that you all are taking in terms of setting up kind of an education and assistance center for school districts to take advantage of the federal funding.

I know in my line of work, the capacity to apply for that seems to be one of the biggest bottlenecks. And so my first question kind of relates to that. Given that I think you've deployed a really good strategy there, are you seeing kind of an acceleration in kind of request for help and demand and that type of thing?

Because I think I've recently heard that only maybe about 3% to 5% of that funding for school districts have already been spent. So it seems like there's just a huge opportunity there.

Yes. Chad, that's a good question. So the answer is yes, we're seeing a significant ramp in questions and requests for assistance in accessing funding. Absolutely, the vast majority of the federal funding has not been spent or accessed.

Even of the CARES Act -- just a few weeks ago, I saw an update to a report that showed, that maybe as much as maybe half has been spent, so there's still a substantial amount or allocated. So there's still a substantial amount of even that first tranche of CARES Act money that is yet to be allocated.

So the answer is yes, we're seeing that ramp, and we feel like, us putting out the guide that we produced just a couple of weeks ago and having internal resources, the timing is right to where we're going to be a resource as more and more questions ramp.

Great. Great. Well, and kind of tied to that, maybe, one of the things that caught my ear was the increase that you're going to have in the sales team, I think, increasing from around 40 to 200 with at least, I think, here in the states.

And I was wondering if you could just provide maybe a little more color on that from the standpoint of -- are you at the point where you're kind of seeing so much demand that you're going to have -- are you expecting kind of a huge material impact by expanding that sales team in that area. I was just wondering if you could comment on that.

Yes. Let me take that first, Michael. So yes, just to make that clear. So currently, we have -- these are external. These are salespeople that our partners who can sell our Clevertouch brand, okay?

So at the moment, we only have about 40 people, salespeople that are partners who are able to sell Clevertouch because we have a very, very tight controlled channel, because we have exclusivity with Tierney.

Because of the merger between Tierney and Trox, Trox have significantly more. They have about 160 sales peoples. And we are in discussions about that exclusivity agreement and extending that to Trox. Now they've merged with Tierney.

And therefore, the amount of external salespeople, our partners who are able to sell Clevertouch will increase significantly from about 40 to 200.

So it is not us employing those people. Those are salespeople, already employed by our partners. But the number of people who are now eligible and able to sell Clevertouch will increase by about 5x. So that's the first part of the question.

The second part is, is the demand there? Absolutely, there is. 100%.

And Chad, I'd add, just to clarify, that we sell through channel partners, value-added reseller partners. So we don't sell direct, in most cases, to the end users. And we have over 1,000 of those partners across the globe.

We have about 300 of those partners in the U.S., for example, and the majority of the remainder are throughout Europe. But those partners have, in aggregate, thousands of reps. You're hearing about Trox, Tierney, but there's thousands of reps out there that support Boxlight in selling our solutions and represent our brand.

Internally, we have dozens of salespeople to help support them, but we are selling through these reseller channel partners.

Now of those partners, you heard Pat mentioned in his remarks, that the top 20 of those partners make up just over 60% of our total sales. So we do have some very significant partners like the Trox and the Tierneys of the world, but we do have a substantial number of partners beyond that, that do order from us and sell our solutions.

Okay. Great. Great. And my final question is focus is on -- I was wondering if you might comment a little bit on what you're seeing in terms of forward-looking in terms of these software solutions?

You've commented a couple of times, I think, on the MimioConnect licensing and those kinds of things, and my assumption, of course, is that software solutions are going to be probably a higher-margin product than, let's say, hardware. And what are you seeing, I think, in terms of the horizon for kind of the software aspect just beyond the hardware?

Yes. So Chad, the way we think of our solutions is, we look at different product categories. So it starts with displays. Displays represented, as we've mentioned, over 70% of our total sales. So that's a largest category. But those are largely interactive flat panel displays.

Then on top of that, we sell accessories. Accessories include mounts and stands for displays, but also our audio solution and document cameras. And we have tablets for the teacher. We have student response devices. Those all fit into accessories.

And then we sell software. That's a category. We break out STEM, STEM standing for Science, Technology, Engineering and Math. That includes our robotic solution, our 3D printing solution. We have a science device that we sell.

And then lastly, we have professional services division that provide training and professional development. And we charge for that, and we provide that, in some cases, district-wide with large contracts. In other cases, we're providing online self-paced or variations in between.

So you really have 5 product categories that we look at. Now today, again, the largest categories, interactive displays, but as we march into the future, part of our aim and vision for the company is to be able to increase those other categories much faster than the rate at which interactive displays are growing, so that our product mix is less heavily weighted toward displays.

So I'm giving you a roundabout answer that, yes, absolutely, we think that software will be a much higher percentage over total sales, as will be services and accessories and STEM solutions. And all of those are much higher margin.

Software is -- you asked about software margin, and that's almost entirely margin for us up in the gross profit margin because most of that cost is actually captured down in our operating expenses.

Now internally, we evaluate a little differently. But if you're looking from an external standpoint, yes, that's going to be very, very high margin. But then also, if you look at accessories, most of those are 40% or 50-plus percent margin. Our professional services is 40-plus percent margin. Our STEM solutions largely are as much as 50-plus percent margin.

And so again, as a company, we're focusing on improving the product mix, improving our gross profit margins, and software is absolutely a large part of that strategy.

(Operator Instructions) And it appears that we have no further questions at this time. I will now turn the program back over to Michael Pope.

Thank you, everyone, for your support and for joining us today on our first quarter 2021 conference call. We look forward to speaking to you again in August when we report our second quarter 2021 results.

This does conclude today's program. Thank you for your participation. You may disconnect at this time.