Vislink Technologies Inc (VISL) 2018 Q1 法說會逐字稿

Hello, and welcome to the xG Technology First Quarter 2018 Earnings Call.

(Operator Instructions) And please note that today's event is being recorded, today, May 16, 2018.

And I would now like to turn the conference over to Scott Gordon of CORE IR Investor Relations.

Mr. Gordon, please go ahead.

Thank you, William.

And thank you all for joining xG Technology's First Quarter 2018 Earnings Conference Call to discuss xG Technology's financial results and corporate developments for the quarter ended March 31, 2018.

Joining me today on the call are Gary Cuccio, xG Technology's Executive Chairman and Chief Executive Officer; and Roger Branton, Chief Financial Officer.

At 5:25 Eastern Time yesterday, xG Technology released financial results for the first quarter ended March 31, 2018.

If you have not received the press release, please visit the company's News & Events website page at www.xGTechnology.com.

Before I turn the call over to Management, I'd like to remind everyone of the safe harbor statement referenced in the SEC filings.

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 fact are forward-looking statement 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 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.

These statements include, but are not limited to, statements regarding the intended terms of the offering and closing of the offering and the use of proceeds from the offering.

When used herein, the words anticipate, believe, estimate, upcoming, plan, target, intend and expect and similar expressions as they relate to xG Technology, 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 risk and uncertainties of the company's business, I'll refer you to the company's various filings with the Securities and Exchange Commission.

And now, it is my pleasure to turn the call over to Gary Cuccio, xG Technology's Executive Chairman and Chief Executive Officer.

Gary?

Thank you, Scott, and welcome, everyone, to our First Quarter 2018 Earnings Conference Call.

I am pleased to join you today to discuss xG Technology corporate developments and financial results for the first quarter ending March 31, 2018.

We had a strong and busy quarter with numerous accomplishments that position xG Technology for continued growth and profitability.

My focus is to continue to work towards profitability with a sharp focus on reexamining each of our product lines and rightsizing the business.

As we continue our efforts to identify and implement cost cuts.

We are well on our way with our recent moves towards our goals of achieving EBITDA and cash flow profitability, which we expect to reach in the third and fourth quarters of 2018.

We're encouraged by the year-over-year improvements we accomplished in both revenue and margins during the first quarter, which rose 4% and 11%, respectively.

We also ended the quarter with approximately $7 million in accounts receivable.

We're excited about the continuing traction we're seeing for our products.

Our HCAM supply chain has been strengthened and our HCAM shipments and backlogs continue to increase.

The last quarter saw the HCAM HEVC 4K wireless camera systems that were successfully deployed in their first live outside broadcast events at the high-profile United Kingdom soccer league matches, and we are seeing a strong uptake building in our broadcasting, sports and entertainment markets with the transition to 4K production.

During the quarter, we announced an order in excess of $1 million from a leading European outside broadcasting provider, AMP Visual TV, for our new HCAM HEVC 4K wireless camera systems and other related equipment.

xG Technology's IMT Vislink business also shipped 50 HCAMs in the first quarter and received over 750,000 in additional orders for our HD Airborne Video Downlink equipment, which is used by law enforcement agencies.

IMT Vislink introduced a new product, the new MicroLite 2 wireless video transmission systems at the NAB 2018 Conference, and we've announced a competitive trade up offer for that new product.

IMT Vislink also debut our new AirPro-75 motorized drive away Ka-band Satellite data terminal at the SATELLITE 2018 Conference.

We have launched the Vislink AirPro-75, which is a small lightweight low-cost single-button deployment IP satellite data terminal for use with Eutelsat’s Tooway and ViaSat's Exede services.

We announced some additional partnerships and collaborations during the first quarter as well, including a collaboration between IMT and Marshall Electronics.

Marshall Electronics is a recognized leader in supplying professional cameras and display monitors and also offers a full wireless video solution for live broadcast and sporting events.

IMT Vislink also partnered with Frontline Communications on a customized Newsnet mobile demo vehicle.

Our military and government video communications business, particularly for secure high-definition Airborne Downlink Systems, remains strong.

From all of this I would draw is clear that our acquisition strategy that we've employed has allowed us to successfully reposition the company.

We will continue to explore similar opportunities where they make financial sense and we can leverage our existing businesses.

Turning to our financial position and outlook for the future.

We expect that we will achieve profitability in 2018 and are driving towards this milestone with the collective efforts of our entire team.

We expect that we will be require additional capital continue to grow and are contemplating numerous nonequity-related, short-term options that can bridge us all the way to cash flow positive.

Currently, we have little debt on our books, and we have capacity to service new debt.

So as conditions warrant and we choose, we may go that route.

I'm pleased with the progress that xG Technology is making across our businesses and we expect our second quarter performance will surpass that of our first.

While we've experienced lower revenues than we had hoped for in the first quarter, we are cognizant of the cyclical nature of our historical sales and expect revenues will reflect growth that we have experienced historically in the past quarter-to-quarter.

With that, I'll turn this over to our CFO, Roger Branton, to go through some of the financial details.

Roger?

Okay.

Thank you, Gary, and good evening, everyone, and thank you for joining us today.

We have consolidated around a stable base of businesses going forward and we are well positioned for future growth, both organically and via additional mergers and acquisitions.

We are also focused on profitability, as Gary has mentioned.

And I will point you to our previous announcement regarding cost-reduction initiatives that we estimate to reduce caused by approximately $5 million.

More than half of those cost reductions have been completed to date with the balance to be expected to be completed over the next 30 to 45 days.

So let's start with the first quarter.

Some key highlights.

Revenues were $9.7 million compared to $9.3 million last year, an increase of 4%.

Cost of components and personnel for the quarter was $4.8 million compared to $5.6 million for the 3 months ended March 31, 2017, which represented a decrease of 14%.

The decrease can be attributed to higher margins, and also, the inclusion of inventory step-up costs related to the acquisitions we completed in March of 2017 quarter.

General and administrative expenses for the quarter was $5.8 million compared to $6.5 million for the 3 months ended March 31, 2017, again, representing a decrease of 11%.

The decrease is primarily related to the inclusion of onetime acquisition-related fees in the quarter ending March 31, 2017.

We do expect G&A costs to decrease going forward due to the cost-cutting initiatives previously announced.

R&D expenses for the quarter were $2.4 million compared to $1.9 million for the 3 months ended March 31, 2017, which represents an increase of 26%.

The increase is primarily due to $300,000 of stock-based comp associated with the expansion of stock options granted and also $200,000 in research-related product development costs.

Again, we do expect R&D cost to decrease going forward due to the cost-cutting initiatives previously announced.

Depreciation and amortization expenses for the quarter was $900,000, compared to $1 million for the 3 months ended March 31, 2017, a decrease of 10%.

The decrease is due to less depreciation recorded on our fixed assets this year versus last year.

The net loss for the quarter was $3.8 million, compared to an $8.3 million profit for the same period last year.

Adjusted non-GAAP loss was $500,000 when taking into account noncash stock option expense discontinued operations and divisions held for sale.

EBITDA loss for the quarter was $2.8 million compared to an EBITDA income last year of $9.8 million.

Adjusted EBITDA loss was $179,000 when taking into account the noncash stock option expenses, discontinued operations and divisions held for sale.

So on a non-GAAP basis when normalizing earnings, we do take into account non-GAAP onetime charges, including stock option expenses, the discontinued operations and the division held for sale.

We use these non-GAAP measures for planning purposes and to allow us to assess the performance of our operations as compared to budgets.

Moving on to the balance sheet.

As of December -- as of March 31, 2018, we ended the quarter with $455,000 in cash, inventory was $16.2 million, accounts receivable $6.7 million, total current assets equaled $24.1 million, current liabilities were $18.5 million, which equates to about $5.6 million working capital ratio.

At quarter end, xG's debt including short-term obligations and accrued interest stood at $2 million.

Moving on to the cash flow statement, net cash used by operating activities for the quarter was $2.3 million, compared to $119,000 used in operations for the same period last year.

Adjusting for discontinued operations and divisions held for sale, net cash used in operations would have been approximately $700,000.

Net cash used in investing activities for the quarter was $30,000, compared to net cash of $6.8 million last year.

The primary use last year was $6.5 million towards the acquisition of Vislink.

So net cash used by financing activities was $11,000 for the quarter, compared to cash provided by financing of $2.6 million for last year.

So with that, I will turn it back over to the operator for Q&A.

(Operator Instructions)

Okay, and it looks like we do have a question from [Patrick McFadden], a private investor.

Gary, nice to -- it was a very nice quarter regarding the cash used, as far as do you have enough cash to get to, to be cash positive over the next 2 quarters?

Well, this is Roger, [Patrick].

Good question.

Obviously, you can look at the financials and, as Gary mentioned, we are looking to additional capital to get us through to the next few quarters.

We do expect to be cash flow positive in quarter 3. So the answer to your question is we're looking at that right now, and we'll be announcing something probably fairly shortly.

Okay.

There's no dilution, you said in the conference as well, right?

No dilution as far as equity, correct, on the stock?

That's correct.

No dilution.

(Operator Instructions) And ladies and gentlemen, this will end the question-and-answer session.

I would like to turn the conference back over to Gary Cuccio for any closing remarks.

Thank you.

We faced and overcome a number of challenges in 2017 that have positioned xG Technology for strong growth in 2018.

I wish to thank our loyal shareholders for their continued support.

We've established a strong foundation upon which to continue to build the company and I look forward to sharing our ongoing developments in the coming months, as we strengthen our company and execute on our expansive strategies.

Thank you all.

And the conference has now concluded.

Thank you for attending today's presentation.

You may now disconnect.