Oblong Inc (OBLG) 2014 Q1 法說會逐字稿

Kirsten Chapman from LHA, the floor is yours.

Thank you, Cara. Good afternoon, everyone. Welcome to Glowpoint 2014 first-quarter results conference call. Before we begin, I want to remind listeners that this call is being webcast live over the Internet and a webcast replay will also be available at the Company's website at WWW.Glowpoint.com following the call. I would also like to advise you that we are referring to slides they can be found in the investor relations section of our website.

Slide two summarizes the Company's Safe Harbor statement. The Company's partial discussion of its financial results should be read in conjunction with the consolidated financial statements and the related notes contained in the Company's form 10-Q for the quarter ended March 31, 2014 filed with the Securities and Exchange Commission today. Various remarks about the Company's future expectations, plans, and prospects constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.

Although the Company believes the assumptions upon which preliminary or initial results, financial information, and forward-looking statements are based on reasonable, as of today's date, these forward-looking statements are not guarantees of the future performance and, therefore, investors should not place undue reliance on them.

These statements are based on facts known and expected as of the date of this conference call and the Company undertakes no obligation to update these statements to reflect the events or

circumstances that may arise after this call. Actual results may differ materially from those

indicated by these forward-looking statements as a result of various important factors including

those discussed in the Company's Annual Report on Form 10-K and other filings with the SEC. In

addition, today's call and webcast may include non-GAAP financial measures within the meaning of

the SEC Regulation G and a reconciliation of such measures to GAAP are contained in the slides.

The call will be hosted by Glowpoint CEO and President Pete Holst and CFO David Clark. There

will be a brief question-and-answer period following the Companies prepared remarks. It is now my pleasure to turn the call over to Peter Holst, Glowpoint CEO and President. Please go ahead Sir.

Thank you, Kirsten. Welcome and thank you all for joining our call today. In the first quarter of 2014, we made great progress in developing the core of our service platform with the goal to provide simple scalable solutions for video collaboration. When our platform becomes generally available this year, we believe Glowpoint will be well-positioned to produce higher revenue,

operating margins, and profitability. All factors we believe will have a positive impact on the

Company's value.

While this will take time, we are excited about the progress to date in the improvements demonstrated by the first-quarter results. We increased revenues sequentially to $8 million compared to $7.9 million in the 2013 fourth quarter. We grew adjusted EBITDA 6% year-over-year and finally, we generated positive cash flow from operations of $534,000, which was more than double the amount generated in the first quarter of 2013.

As I've outlined in prior calls, video communications are shifting from high touch purpose built systems to a converged mix of applications that incorporate mobile devices and integration with unified communications solutions. Convergence across the boardroom systems, mobile applications, unified communications, and browser-based solutions are creating significant market opportunity.

Consider the following statistics, the global business process outsourcing and information technology services market has now reached over $600 billion in 2013 according to HFS research. Video enabled mobile devices specifically for business now are expected to maintain a high growth rate consistent with user migration to handheld and/or tablet computing. The global unified communications market is expected to grow at 15.7% compounded annually through 2018, according to TMR.

And finally, the remote support market is expected to grow at 7.2% through 2016 according to Gartner.

These are just a few of the promising industry projections. We are excited about the future of video and fundamentally believe it will be the core application of next-generation collaboration. Companies are increasingly deploying critical assets virtually for redundancy and flexibility to course correct faster as technology shifts. However, and above all else, people remain a company's most critical asset and employees growing demand for flexible scheduling, mobile access, and real-time information while remaining visually connected are critical for business continuity.

As discussed on the 2013 year-end call, we believe there are a number of core value drivers to achieve our goals. We have a clear product vision and experience to enable organizations to seamlessly integrate video by providing a flexible level of business class support to complement our customer's existing IT resources. To achieve our growth objectives, every service we develop will use global standards, leverage our core service platform, and use automated response tools to their fullest capability.

We create scale by deploying industry-leading customer relationship and service management solutions built around global IT and operational standards. At this stage,

we have completed small but important releases that are building blocks for differentiation in the user experience. We are also investing in organic product development heavily but continue to actively assess inorganic opportunities that would complement our core services, expedite speed to market, expand our portfolio, and create sales synergies.

And finally, the development of our API will allow current and prospective partners to not only integrate faster on to our platform but also develop to it as well, both cornerstones of our sales strategy.

With respect to our sales and marketing efforts, I would like to provide a general outline of how we intend to go to market and our process to yield results. We intend to grow the business through sales channels and alliances moving forward. Selling through partnerships and alliances requires a long-term commitment to align with existing products and services while creating a depth of technical and marketing resources to facilitate a sale. Sales volumes will grow as we operationalize our channel partners and believe this approach should drive the same value as Metcalfe's law does to a network by creating more opportunities on both a consumer and supplier basis.

As outlined in the prior call, we have reconstituted our sales team to acquire new partners while also enhancing the user experience by committing to a high level of operational service delivery. The sales team will gradually expand over the course of 2014 with an ever-increasing focus on not only creating new channels of distribution but developing content and training to create a more seamless experience for the end user. At the end of the first quarter, we completed the initial phase of our sales support model designed to better assist our partners operationally.

Though our new service platform is still in the alpha phase, already, channel partners are actively looking at the scope of our model and beginning the process of quote unquote productizing us within their portfolio.

Additionally, we're also fostering other customers� relationships. Russell Reynolds is one of the leading executive retain search firms in the world. And we are pleased to say the rollout of their new global network is almost complete as we discussed on the last call. The Russell Reynolds video ecosystem will be managed from the Glowpoint cloud connecting all 50 global locations to our core platform. Also in the last call, we talked about a close relationship we formed with Regis, the world's largest provider of executive suites in virtual office centers.

We will significantly improve the quality of its video services in all 2000 Regis locations and in turn, Regis will provide us with a host of meeting room solutions that complement our portfolio of video services.

Through these measures, we expect to improve our margins. Margin improvement will be driven by a number of factors. Lower cost on network and virtualization of infrastructure, automation of our on-demand public video suites, system automation that reduces meantime to remediation for our customers, enabling us to invest more in development and marketing. And finally, improvements consistent with migrating our model from multiple systems for disparate use cases to a common single service platform.

To expedite the delivery and adoption of our platform, our capital expenditures in 2014 will be almost 3 times more than prior years in an effort to create a defensible and sustainable service.

To recap, we are aggressively investing in systems, product development, and sales to create a complete ecosystem to support partners and end-users alike and believe Glowpoint has a bright future in video collaboration. Now, I will turn the call over to David Clark for the financial review.

Thanks, Pete. I will first review our financial results for the first quarter and then provide a summary of our financial outlook.

As summarized on slide five, revenue for the first quarter of 2014 was $8 million and increased 1% sequentially from $7.9 million for the fourth quarter of 2013. This increase was driven by growth and network services revenue.

Revenue for the first quarter of 2014 was down 6% year-over-year from revenue of $8.5 million for the first quarter of 2013. This decrease was driven by lower revenue for video collaboration services.

Turning to the next slide, adjusted EBITDA increased 6% to $889,000 in the first quarter of 2014 compared with $837,000 for the same period last year. The improvement was mainly due to lower operating expenses partially offset by a decrease in revenue between these periods.

Also, our adjusted EBITDA as a percentage of revenue improved to 11% for the first quarter of 2014 as compared to 10% for the same period last year.

Next, I will review key data relating to our cash loan balance sheet on slide seven.

In the first quarter, we generated positive cash flow from operations of $534,000 which was up from $264,000 in the same period last year. Capital expenditures in the first quarter totaled $434,000 and primarily related to key investments in our platform and infrastructure that Pete discussed earlier.

Net cash dues and financing activities for the first quarter of 2014 was $208,000. Our cash position at March 31, 2014 was $2.2 million compared to our cash position of

$2.3 million at the end of 2013. We ended the first quarter with positive working capital of $726,000. Now for our financial guidance on slide eight.

While we are not giving quarterly guidance, we are reiterating the guidance for full-year 2014, provided on March 6, 2014. Revenue for full-year 2014 is expected to be approximately level with 2013. We do expect that we will see improvements in revenue in the second half of 2014 as compared to the first half. Gross margins are expected to gradually improve in the second half of 2014 as compared to our 2013 gross margins of 42%. Adjusted EBITDA for full-year 2014 is expected to grow by approximately 10% from 2013 and capital expenditures for full-year 2014 are expected to approximate $2 million and are expected to be funded from positive cash flow from operations in 2014. And now I will turn the call back over to Pete.

Thanks, Dave. In summary, we know there is a substantial market opportunity for video with over $3 billion having been invested in the collaboration space through venture capital, private equity, or mergers and acquisitions since 2010. Many companies are focused on delivering a cost-effective user experience for the masses with the promise of simplicity, ease of use, and reliability.

The market has become somewhat fragmented as a result between those promoting the quote unquote self-service, cheap and easy to deploy versus middle market or enterprise demands that really require a more holistic solution addressing 24 x 7 support monitoring, device management, security, reporting, training, and other key services that complement the video experience.

Given our years of domain expertise, we believe Glowpoint will be well-positioned to address the more solution oriented demands of customers looking to solve their video collaboration and unified communications challenges of the future.

I'd also like to welcome new Board members Jim Collin and Pat Lombardi. Both bring a substantial amount of experience that will be highly valuable as we move forward. Also, we're looking forward to meeting with members of the investment community at two upcoming conferences, both in Los Angeles. We plan to present at the B. Riley conference on May 19 of this month and the LD Micro invitational on June 4. With that, I will open the call for questions.

(Operator Instructions) Jack Gilbert.

In the Annual Report in proxy, I see we have -- on page 4 and 5, we now have five patents? To your knowledge, is anyone infringing on any of our patents?

Not to our knowledge, Jack. We regularly consult with our patent attorneys every quarter and they do a search for us out there, as you might guess, and to our knowledge, no one is currently infringing on those patents.

Are we applying for new patents?

Yes, we will be applying for new patents this year as a result of the creation of our new platform.

Okay, thank you.

(Operator Instructions) And there are no further questions at this time.

Great. Thanks, everyone, for joining us today. If you would like to learn more about Glowpoint over the coming weeks, please contact our investor relations firm to arrange a meeting during the course of our travels. We appreciate your continued support of Glowpoint and look forward to talking to all of you in the near future.

Thank you. This does conclude today's call. We thank you for your participation. You may disconnect your lines at this time and have a great day.