Vislink Technologies Inc (VISL) 2021 Q1 法說會逐字稿

Good day, and welcome to the Vislink Technologies 2021 First Quarter Earnings Update Meeting. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Belinda Marino, Corporate Secretary of the Board of Directors. Please go ahead.

Good morning. I would like to remind everyone of the safe harbor statement referenced in the SEC filings. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for certain forward-looking statements, including statements made during the course of today's call. Statements contained herein that are not based upon current or historical facts are forward-looking in nature and constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934.

Such forward-looking statements reflect the company's expectations about its future operating results, performance and opportunities that involve substantial risks and uncertainties. When used herein, the words anticipate, believe, estimate, upcoming, plan, target, intend and expect and similar expressions as they relate to Vislink Technologies, its subsidiaries or its management are intended to identify such forward-looking statements. These forward-looking statements are based on information currently available to the company and are subject to a number of risks, uncertainties and other factors that could cause the company's actual results, performance, prospects and opportunities to differ materially from those expressed in or implied by these forward-looking statements.

For a more detailed discussion of some of the ongoing risks and some uncertainties of the company's business, please refer to the company's various filings with the Securities and Exchange Commission.

And now, Mickey Miller.

Thanks, Belinda. I'd like to welcome you all to the Vislink Q1 2021 Earnings Webcast. I'll be joined on this webcast by Mike Bond, CFO of Vislink. We'd like to take this opportunity to report on our Q1 and the progress we made as well as latest developments and future prospects. Participants will be able to submit questions during the webcast from the main webcast page, and we'll try to take as many as possible.

In the first quarter of 2021, we started to realize revenue from projects that had been delayed or canceled because of the COVID pandemic. Among the notable wins was a contract we received to be a project supplier to a substantial equipment upgrade for Alabama Public Television as well as the U.S. Department of Defense order for our ruggedized and lightweight video communications equipment. We were proud to launch 2 new products in the quarter, IP Link 3.0, which will have its first major deployment as part of the the Alabama Public Television order, and the Quantum wireless camera receiver, which has begun shipping, and we expect to deploy at many Tier 1 events this summer. Both products have healthy sales pipeline and will contribute to our plan to introduce more new products this year than we have in the last 5.

Notably, we continue to see increased quoting activity for new projects as planning for live in-person sports entertainment events has started after being on hold. This is great news when you consider that the entire live sports industry experienced a contraction of over 70% around the world due to COVID. We are very encouraged that the new business bookings in our key segments were substantially up during the period. A special note is that our Live Production business saw bookings jump almost 70% over same period in 2020. As a further sign of our business to return to normal levels, our bookings to date this year as of mid-May were higher than all of 2020. This portends well for closing new orders over the coming quarters. Despite the lower revenues recorded in the quarter, the significant cost and operational improvements we have executed resulted in a substantially narrower loss, while positioning us for better outcomes as business increases.

In Q1, we nearly have both our operating EBITDA loss in the same period in the previous year as we continue to better align our operating structure with revenue levels. This was a result of the ongoing stringent efforts we have made to put our finances and operational processes on a more sustainable footing. Thanks to the $50 million capital raise we closed in the first quarter of the year, we've not only solidified our financial foundation, we have also now additional resource to make strategic investments in internal operations as well as evaluate and pursue targeted acquisitions where they make sense for our business.

I will now turn it over to Mike Bond, who will walk us through our financials.

Thanks, Mickey, and good morning, everyone. Here are some of the main financial results for the first quarter. First quarter 2021 revenue was $4.1 million compared to $5.4 million in the first quarter of 2020.

Gross margins were 45% -- sorry, 46% of revenue in the first quarter of 2021 compared to 47% of revenue in the first quarter of 2020. In the first quarter of 2021, the net loss attributable to common shareholders was $2.7 million or $0.07 per share compared to a net loss of $4.4 million or $0.54 per share in the first quarter of 2020.

EBITDA, which is earnings before interest, taxes, depreciation and amortization, for the 3 months ended March 31, 2021, was negative $2.4 million compared to a negative $3.9 million for the 3 months ended March 31, 2020. We ended the first quarter 2021 with $60 million in cash compared to $5.2 million at December 31, 2020. Those are the highlights for the first quarter.

I'll now turn it back over to Mickey to provide an operations update and an outlook on business in our markets.

Thanks, Mike. Our product pipeline remains very robust. As I mentioned, in Q1, we started shipping the latest iterations of 2 key products that will play essential roles in our offering across the board. The IP Link 3.0, this is a new ATSC 3.0 advanced studio-transmitter link system that allows broadcasting service platforms to access new opportunities for monetization. The Quantum wireless camera receiver is a native IP solution that provides robust reception from wireless camera transmitters that will give event producers exceptional flexibility in managing their production workflows and substantially lower their operational costs.

On the product management side, we initiated the remainder of our previously announced plan to rationalize our product lines. This is a way for us to better focus our engineering and development resources, streamline inventory and improve responsiveness to the needs of the market. We also added additional capabilities to our engineering group, and we increased spending on R&D by 20% to help us keep our technology base at the cutting edge. Even as we enter our growth mode, we have maintained our focus on the financial discipline. During Q1, we further tightened up headcount, completed the closure of a redundant facility and adapt the organization to operate on a leaner basis.

We see the following in-store for our key market sectors. In the broadcast Live Production market, in Q1, we started to see the first tangible signs of recovery in this market. This is the first evidence of what many industry analysts are forecasting. Namely that the remainder of 2021 and beyond will see a rich pipeline of live sports events coming back online. For the MilGov market, the U.S. Army order received in the first quarter is a sign that the MilGov market is slowly coming back. Our revenue in this sector was substantially higher than Q1 from a year ago.

Our SATCOM revenue came in higher than projected in Q1, and we foresee growing opportunities for recurring revenues from ongoing integration projects. And finally, in services, in Q1, we recorded one of our first extended warranty contracts under the new managed service category and believe there is more to come. With COVID restrictions started to ease, we expect to return to be able to execute more on-site servers over the coming months.

Looking forward, we forecast increasing demand from our key markets as they return to post-pandemic levels. As a result, we see considerable opportunities to maximize revenues, regrow our business and deliver shareholder value during the rest of the year and beyond. We look forward to updating you on our progress.

Now we'd like to answer some of the questions that have been submitted during the webcast.

(Operator Instructions)

Okay. First one, I would like to know when we will see $50 million that was raised a few months ago utilized to enhance shareholder value?

It's a great question. Mike, do you want to address that?

Yes. We're very confident in one thing. We don't want to utilize it in losses like we had in previous periods. So as Mickey mentioned, we have reduced our breakeven substantially through operational efficiencies and some cost cutting. So that $50 million, as you well know, still sits on the balance sheet for the most part, and we are using that for strategic alternatives. Mickey and I are looking almost on a daily basis for opportunity where we can invest strategically. We expect to do something by the end of the year. Let's -- we're hopeful for that. We have a lot of opportunity that we're looking at, and we intend to hopefully execute between now and the end of the year.

Yes. Another one, you mentioned bookings to date are higher now than all of 2020. Will most be recognized as revenue in 2021?

Yes, the majority of bookings that we booked this year, we expect to ship in 2021. We are -- operations team are very focused on this, and we expect to be able to ship a large portion of that in 2021.

Another question, with COVID-19 coming under control and without -- with rollout of vaccines as well, how does the company outlook look now compared to just a few months ago?

I think based on everything we've seen, quoting activity has picked up dramatically in the last few months, particularly in the U.S. As I said, our bookings as of mid-May were higher than the entire year of 2020. We're seeing solid demand across MilGov and Live Production. So we're really happy with what we're seeing in the opportunity funnel and the ability to exercise and close on those. So we're optimistic about that continuing. I think initially, April continued strong, so we're pretty happy with where we came in on bookings side in April.

Mickey, here's a question, do you anticipate any supply chain concerns?

And here, we have seen a tightening in the supply chain, we have strategically procured certain items, parts and microchips that we think are critical for us. So we have gone along on certain items, and we don't anticipate any real supply chain interruption at this point.

There's another one. Can you briefly touch on the drop in gross margins? Is that mostly due to supply chain constraints? Should we expect to see that bounce back?

The gross margin was all volume-based. So as we talked about, we saw bookings increase. However, the backlog coming in was still impaired due to -- or reduced due to COVID-19. So with the new bookings, we weren't able to get a lot of the shipments out in the first quarter as we manage our inventory. Now that we have a nice backlog, we'll be able to do that. But it was largely due to volume. And then a little bit due to mix, we had higher percentage of older SATCOM products that were part of it. But we would expect, as revenues get normalized, to what we'd expect that will be -- our margins will be in line with historical margins.

I think there's a question. Do you see additional business from the government infrastructure spending?

And here, we think we will. We think we'll benefit very well from that. We have seen quoting activity in the first quarter go up dramatically, and in some cases, multiples of what we experienced last year. As Mickey has mentioned before, we sell into most of the country's police departments and first responders, and we feel very confident that we'll get an increased amount of activity in business from that sector.

Here's a question. Is Vislink part of the Olympics?

And the answer to that is, yes, in a variety of ways. There's many producers and participants in the Olympics from a broadcast perspective. We have as customers very vast array of those particular vendors who will participate in telecasting the Olympics. And again, we see a lot of activity, a lot of quote activity related to the Olympics and other major sporting events that are now coming back online after COVID.

Here's one. When do you expect to be profitable?

As you know, we don't give forward guidance, but here's how we look at it. You can see in our 10-K, we brought down the cost of our platform extensively through the initiatives we implemented last year. We did this while increasing our R&D spend for new products. But just to illustrate, in Q1 '21, even though our revenues were 20% -- 24% lower, our EBITDA was 39% better. So all things being equal, like product mix, we should be -- expect to be profitable at normal non-COVID revenues based on the initiatives that we put in place to lower our breakeven.

There's a question that says, I imagine you booked very little in 2020 due to the pandemic. So how much do those low bookings impact 2021 moving forward for the next 3 quarters?

And the answer there is that, yes, we had low bookings at the end of last year. But again, we're seeing a substantial increase in those bookings. And as Mickey said, we've now booked more business this year-to-date than we had in the entire last year, and where our quoting activity is gone up by multiples. So we do see a increase in business and the prospect for more business. And again, we're very bullish on the next couple of quarters.

Here's one. What puts you ahead of your competitors in terms of securing contracts?

First thing, Vislink has a great brand in the markets that we serve. A long history of bringing new technology and supporting customers. So we have a great brand. The challenge that we had last year and in the prior year was because of the financial position of the company, they weren't able to pay suppliers and hence, weren't able to ship reliably to customer. We have fixed that through the initiatives we put in place as well as the efforts that we've put around our financial foundation. So now we're in a position to build from that great name that Vislink has and the extensive sales force and global partners that we have. And so in many cases, whether it be in live sports or in MilGov, we are perceived as the tech leader and as the most effective solution to solve the problems that our customers are trying to solve, which largely are around taking video and using it to make incredible content or make very cost-effective decisions. And so we'll continue to build on the markets that we serve as well as growing into new markets.

I think that's the end of the questions.

Yes. I think there's a few more here, but I think some of them are consistent. Are we under any acquisitions talked?

Of course, Mike mentioned that the fund raising we did in February is targeted for growth. We're in a lot of discussions, but we want to make sure that we're disciplined in our efforts, and we won't do a deal just to do a deal. Mike and I both in our careers have seen most acquisitions don't work out and don't provide value to shareholders, whether it's culture related or strategy. So we're going to be very disciplined and deploy capital where we believe our shareholders will get the best returns, and we'll continue in that effort. As we -- as Mike said, we're very involved in a variety of discussions where we see opportunity, but it's going to be the right deal for our shareholders.

Let's see. I think just one last one here, which Mike kind of touched on, what do you see as the biggest hurdles for 2021?

Now that we have the people, the new products and processes and cost-effective infrastructure in place, and in -- COVID in some parts of the world is under control, we need to execute on our revenue plan. The biggest hurdles we see, which you hear is component availability, particularly semiconductors. Our supply chain team is working diligently to identify potential risk and address them. As you know, this is not something unique to us. It's an electronics industry phenomenon, but we're super focused on that because now that we see things coming back, we want to make sure that we can fulfill the opportunities that we do have. We're fortunate to have a strong balance sheet and excellent supplier relationships to address the problems if they come up.

I think -- we've got other questions, but I think they're all -- I think the major themes we hit based on other questions that we're at. So this will end the question-and-answer portion of the webcast. I appreciate all those who submitted questions. And we -- as Mike and I talked about, our focus here is on building shareholder value, and we'll continue to focus on that. We're encouraged by what we've seen in the market. We're encouraged with the product pipeline that we have coming out as well as the opportunity and sales funnel that we're seeing. So we're going to conclude here, and we'll report on second quarter in August.

The conference has now concluded. Thank you for attending today's presentation. And you may now disconnect.