Vislink Technologies Inc (VISL) 2020 Q4 法說會逐字稿

Welcome to the Vislink Technologies 2020 Review of Results and Business Update Meeting. (Operator Instructions) Please note, this event is being recorded.

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

Good morning, everyone. 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 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.

Thanks, Belinda. Hi, this is Mickey Miller. I'd like to welcome you all to the Vislink Full Year 2020 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 full year results and the progress we made in the fourth quarter of 2020. We will also provide an update on our 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 at the end.

In 2020, we were impacted by the wholesale cancellation of live events due to the COVID-19 pandemic. Despite the ongoing market challenges, we started to see positive signs in our business by the end of the year. Our fourth quarter revenues were over 40% higher than our third quarter, rebounding to almost $7 million, which represent our strongest quarter of the year. Our SATCOM business sector showed particular strength in Q4, with revenue up over 13% and bookings up over 52% from the same period in 2019. We also maintained a targeted investment in key product lines, which will allow us to maintain and expand our leadership in providing advanced video solutions across diverse industries.

In the face of this difficult operating environment, we took concrete steps to increase liquidity and strengthen our financial position. This included a strategic initiative undertaken in early 2020 to mitigate the potential impact of COVID-19 with targeted reductions in operating expenditures that were made in November 2020. The implementation of proactive spending cuts across the business allowed us to realize savings of approximately $5 million in 2020. It is important to note that a significant portion of the loss we reported for the year was a result of rightsizing actions. For the year, $5.8 million of the negative EBITDA of $16 million was attributed to onetime write-off of expenses related to reductions in headcount, facilities and product lines. These actions allowed us to underpin the company with financial and operating stability. As a result, we entered 2021 with an improved balance sheet, access to capital and cash available for targeted investments in R&D, channel expansion and strategic acquisitions.

With Phase 2 of our financial turnaround largely complete, we are now entering the next chapter in our story, Phase 3, in which we will focus on pursuing profitable growth through both an increase in organic business development as well as strategic alternatives. The $50 million capital raise we closed in February will greatly facilitate these efforts.

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

Thanks, Mickey, and good morning, everyone. Now the main financial results for the year. For the year ended December 31, 2020, revenue was $22.9 million. That compares to $28.9 million for the year ended December 31, 2019. Gross margins were 39.4% of revenue for the year ended December 31, 2020, compared to 45.6% of revenue for the year ended December 31, 2019. For the year ended December 31, 2020, net loss attributable to common shareholders was $17.6 million, or $1.19 per share, compared to a net loss of $18 million, or $12.08 per share, for the year ended December 31, 2019.

EBITDA, which is earnings before interest, taxes, depreciation and amortization, for December 31, 2020, was a negative $16 million compared to a negative $13.8 million for the year ended December 31, 2019. However, $5.8 million of that negative EBITDA was attributable to onetime write-offs of expenses, as Mickey had mentioned in his narrative. We ended the fourth quarter 2020 with $5.2 million of cash compared to $1.7 million at the end of 2019. I'd like to note that we raised an additional $50 million of capital in February of 2021.

As Mickey mentioned, we successfully executed on the main goals of our financial restructuring plan. These included the following actions. We reduced our real estate footprint by 60%, we reduced overall headcount by 40% and we also eliminated all third-party debt.

I'll now turn it back over to Mickey to provide an operational update and outlook for the business and our markets. Thank you.

Thanks, Mike. In 2020, we implemented integrated business planning processes with the goal of reducing working capital requirements and quote to cash. We've simplified our overall business model and streamlined our sales organization by bringing it to tighter alignment with our geographic revenue breakdown. New product development processes have been put in place and have started to yield new product announcements. Just this week, we announced the launch of our brand-new Quantum, wireless IP native camera receiver. This is a very exciting product for us. It's a complete total native IP solution that provides a foundation for the future of the connected edge. As we see live events coming back, it will give event producers unprecedented flexibility for their production workflows and also will spin-off for benefits in our MilGov segments.

On the product management side, we streamlined our offering by 46% and expect to execute on the remainder of this plan in 2021. In addition, we continue to optimize our supply chain and continue to drive strategies to help insulate us from disruptions as worldwide commerce rebounds and supply capacity is challenged. We plan to focus on a combination of accelerated organic product development, a redoubling of technical partnerships that leverage the deep contacts we've established over decades of existence and the evaluation of potential acquisitions where they make technological and business sense. Guiding our actions will be our strategy that will encompass all aspects of our business and challenge all departments to obtain heightened levels of performance and efficiency.

Looking forward, we see the following in store for our key market segments. In the broadcast live production market, we are beginning to see signs that projects for live in-person sports and entertainment events are coming back online. Quotation activity for infrastructure events is increasing, and we expect this trend to accelerate as previously postponed and canceled events start coming back on the calendar in the second half of 2021. We continue to be the supplier of choice for premier sporting events. And most recently, our equipment was primarily featured at this year's Super Bowl, the NBA All-Star Game and Formula E World Championship Season Opener.

In the MilGov market, worldwide military and public safety budgets continue to be oriented more towards equipment upgrades and legacy hardware modernizations. We are leveraging our long experience in addressing these types of purchases to pursue tender opportunities through our expanded indirect partner channels.

In the SATCOM area, revenues and bookings remain strong, and we expect solid growth to continue from both commercial and public sector customers for this business line.

On the services side, we've become more aggressive of our marketing of our service business with extended warranty offerings now included in applicable quotations. We have created a growing pipeline of service-based business across 3-year, 4-year, 5-year warranty options and expect this to grow commensurate with revenue increases.

In summary, we are cautiously upbeat that as worldwide business starts returning to pre-pandemic levels in 2021, we will be well positioned to capitalize on growing opportunities across our live event production, MilGov, SATCOM and service Solution areas through 2021 and beyond.

With our financial house now on better footing than it has been in years, we are turning our attention to executing on our plan to achieve growth, profitability and value for our shareholders. We are very encouraged with what we are seeing given that in the first quarter of 2021 we booked more business than we did in quarter 2, quarter 3 and quarter 4 of 2020. We look forward to reporting back to you on our progress in subsequent quarters.

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

(Operator Instructions)

Okay. Great. We have a question, John Faber. Why new product -- what new product should the investor be most excited about?

Well, I think I'm excited about all our products. I think I've mentioned in the past, we're developing more products this year and we'll introduce more products this year than the company has introduced in the last 5 years. We introduced our DVE6100 production earlier this year. That's our -- one of our satellite products for compression and distribution. And of course, our IP Link 3.0, which leverages on the ATSC 3.0 standard that's happening in the communications world. We're very excited about the product.

We've secured some orders around that, that we'll be announcing. We're very excited about that product. And of course, Quantum, which we just released earlier this week, which is the bedrock and foundation of our future connected edge. In order to have a connected edge, you must have IP connectivity. This product of Quantum will be our first product receiver that will have IP connectivity, and it provides a plethora of benefits, not only to the live production world but we can leverage that product base and move that into our MilGov consumer business as well. So we're very -- MilGov customer business as well. So we're very excited about that.

And so we plan to have future announcements that are, again, leveraged around our connected edge thesis and theme that we're focused on. And we're very encouraged about not only the products we're introducing but how we're introducing those products. We are using standard modules -- both semiconductor modules and circuit modules so that we'll be able to leverage our circuits by bringing more cost-effective products to market faster rather than reinventing the wheel on each new product. So we're very excited about the work that's been done in our new product development area as well as our transition into operations.

Mickey, I see a question. What are your plans for the additional capital that you've raised?

And here, we think we've optimized our operational platform throughout 2020. We believe we have a platform that can deliver profitably on the revenue that we're anticipating and hopefully deliver more as we increase sales. Our focus is to invest in engineering and R&D to bring new products forward. It's also to look at and potentially invest in potential partnerships and relationships with technology providers that can augment what we bring to our customers today. And we are very aggressively looking at other potential acquisitions, additions to our portfolio that could augment what we offer and increase the scope of what we can offer to the customer.

Another question. In Q3 call, you mentioned a large order for a new racing series. When do you expect to announce that?

Yes, that's true. We still have not announced that. We hope to be announcing that soon. We're very excited about that solution and that event, and we'll be announcing that as soon as we work through the details in the PR departments of the companies that were involved in that. But again, that's on track to be announced, and we hope to announce that as soon as we have approvals from our customers.

We have a question, is the downsizing complete.

At this point, we believe it is. We always do reserve the right to optimize the platform to make it more profitable to optimize it for future business. Our intent at this point is to increase spending in certain areas that are strategic to the company, i.e., engineering and R&D, like I had mentioned previously. But we do believe with the $5.8 million, $6 million write-off that we took in the fourth quarter that we have substantially optimized the platform at this point from an operational standpoint.

We have another question. Do you have any updated contracts to announce soon that are in the pipeline and what do you see in business going forward?

So yes, we do have some announcements to be coming in the future. As we've mentioned on previous calls, what we like to do and what we require is our customers to be a part of those announcements and to support those announcements. So we're working through details of orders that we won as well as future orders that we expect. But as I mentioned in the beginning comments, in Q1, and we typically don't give guidance a quarter ahead, but we just completed Q1 yesterday. In Q1, we booked more business than we did in the last 3 quarters of 2020. So we're very excited about, A, the acceptance of the new products that we're bringing to market, coupled with the market coming back to some degree. Obviously, we're cautiously optimistic. We can't make commitments around what will continue to happen relative to the pandemic, but we're very encouraged by the robust activity both in quoting and new product orders, the new orders that we saw in the first quarter of this year 2021.

A question about the effects of COVID and whether it will continue into 2021.

As Mickey had mentioned previously, we did see a fairly strong quarter from a sales perspective in the fourth quarter and we're seeing very increased bookings in the first quarter, as Mickey just mentioned. And we think that's a sign that things are starting to loosen up, and our customers are starting to come back and live events are opening up. So we feel fairly bullish that we will see an uptick in bookings and business in 2021.

Yes, we have another question, what do you plan to do with the cash you have on the balance sheet?

Again, as we've said in the past, the money that we have raised in the February raise is focused on growth and in several areas, both strategic acquisitions.

There's other question, are we in discussions around acquisitions?

Yes, we're looking at a lot of different opportunities. We've made no commitments, and we'll continue to pursue opportunities that we see that augment what we do, but also opportunities that we think have tailwind based on the connected edge and what's happening, both with ubiquitous IP and various wireless technologies are being deployed. So as we've said, we're very focused on that cash, not for operating, but for focused investments in growth, and we'll continue to stay extremely focused on using those funds to target the growth areas that we see for the company.

There's a question about where our stock is trading today? Where we believe it should trade in the future?

Again, we take the position that we will do the best we can operationally. We will -- we have raised capital to expand the business, to invest in the future. As Mickey said, to potentially look at strategic partnerships and acquisitions. We think if we execute on those strategies, if we optimize our platform, if we go out and we find the right products to sell to our customers, augment our portfolio and we're successful at that, then we think our share price should grow, obviously. And we're happy with where we are today in the market.

We've had several questions around NFTs. I think that's a great question.

It's something that we've been studying and taking a look at. Obviously, we capture a lot of original video. And so we think it's interesting for us. We're continuing to investigate that and learn more about that. We'll also have an NFT of this conference for sale after the call. That's April Fools. But yes, so NFTs are very interesting given our position in terms of capturing very engaging, very unique video. It's something that's of certain interest to us.

There's a further question as to whether we will raise additional capital in the future.

We think at this point, we're positioned very well financially. We like the financial stability that we have at this point given the additional capital raise we accomplished in February of 2021. However, we are looking at various opportunities and alternatives, and we do reserve the right at some point to potentially raise more capital. But right now, we feel very comfortable where we are.

We have another question. How will Vislink take advantage in cashing on the 5G revolution.

We think 5G will be a key element of the extended edge -- connected extended edge. No matter what wireless interface it is, whether it's 5G, whether it's Quantum, whether it's a proprietary mesh, whether it's Wi-Fi 6, we plan to have the ability to take information from all elements and take proactive action in the markets that we serve. So we see 5G as a very low-cost way to bring IoT connectivity as machines connect more machines. And clearly, the connected edge is all about that and then taking that data and that video and using AI to make better decisions, to make proactive decisions and to do it at a much lower cost than can be done today in the markets.

There's a question about what do you think you'll be increasing your focus on international growth, whether it's in Asia or other areas.

Again, I think we do business currently all over the world. We have business in Asia, Middle East, Europe, North America and South America. So we are always looking for opportunities to expand, to increase our reach globally. We think we have a sales team that deploys very well throughout the world, and I'll let Mickey comment on this as well. But at this point, we do look proactively at extending our sales coverage, if it makes sense.

Yes. We have a lot of questions about specific customers.

And as we've noted on previous calls, we have a general philosophy that we don't make announcements without our customers involved in those announcements and being a part of those announcements in terms of improving those announcements. So when we do have the opportunity to announce with customers, we take advantage of that, and we really push hard with our customers to make some announcements. Some customers don't prefer to make announcements and certainly, that's up to them. But where we can, we will. So be assured that where there are opportunities for us to put out a press release around a new customer or a new order, we do.

And obviously, we don't do it around every order. But if we think it's material, we think it's either interesting market, interesting company. As we mentioned earlier this quarter, we had our $4 million order with the U.S. Army. As U.S. Army is a very valid -- valuable customer of ours that we continue to execute on, so we're very excited about that. So those are the kinds of orders that we'll continue to announce and be assured, we will. And -- but in some cases, we're just not allowed to talk about it.

Okay. Let's -- I want to appreciate everybody. We have a lot of questions on here. Really appreciate the involvement and activity of the shareholders. Some great, great questions. Really appreciate it. So we're going to do one more question. Let's go through this, there's a lot here. I think here's one is last one. Who are some of your biggest competitors in your stakes and what 5-year goals are most critical getting you closer to those big players?

I think when you look at the markets that we provide into, we see areas that we have -- we're part of larger markets like the ISR market for MilGov. It's a multibillion-dollar market. Live production, we see in some of our proprietary products. We have a large position in a very small market. And then SATCOM is a massive market.

So we play in a variety of markets and we see opportunity for growth in those as well as other markets. Our fundamental belief is that in the next 10 years every industry will be reinvented and will be reinvented for 3 reasons, connectivity to machines. As I mentioned. Wi-Fi 6, 5G, proprietary customer mesh. Machines will be connected. Data, massive amounts of data will be collected, and AI on top of that data will be able to make much better decisions than we can make as humans looking at video. So we see massive, massive disruption in a lot of different areas. And that's what we're acutely focused on and is where the best opportunities to leverage the capabilities we have as well as acquisitions we make to bring that reinvention to those key market segments and industries in the future.

So we're really excited about the capabilities that we have and leveraging those with the tailwinds of this massive reinvention that we can see happening in markets throughout the world. So we think we've got a great position. We've done the financial restructuring. We've got our operations and new product development engine working and continuing to improve. We've got our cost structure in place, and now we've raised fresh capital to focus on growth. So we're very excited about our potential. We're very excited about the opportunities that lay ahead of us. And as I mentioned, in Q1, our order book, we're really excited about what we see there, and we hope that continues.

Our team members in Vislink, we're very proud of the work that's been gone. I know there's a lot of sacrifice from everybody on the team during 2020 to work through the pandemic. There was a lot of challenges that were overcome. We did that cost effectively. There are a lot of sacrifices that were made by many people and everyone on our team. So we're very thankful for that, and we're looking forward to continuing to focus our efforts to bring shareholder value to our shareholders and want to thank everybody for your support and look forward to providing you with updates as we move along.

Thank you, everybody.

This concludes our question-and-answer session. I would like to turn the conference back to Mickey Miller for any closing remarks.

Thank you. As I said, Mike and I are both very excited about the opportunities for this company. I think a lot of the hard work that we've done in the last year we're going to start seeing the benefits of. We're very focused. And as we said in our first call, we came here to make this a large company, to build the kind of company that all of us want to work for. And we're very excited about the team that's in place. And the efforts of our team members and look forward to continuing to focus on shareholder value and growth. Thank you, everyone.

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