Vislink Technologies, Inc.
Q2 2021 Earnings Call Transcript

Published: 17 Aug 2021

[Operator:]

Welcome to the Vislink Technologies 2021 Second Quarter Earnings Update meeting. During today's presentation, there will be an opportunity to submit online questions. You may submit online questions using the window on the webcast. 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.

[Belinda Marino:]

Thank you. And good morning, everyone. I'd 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, belief, 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 I would like to turn it over to Mickey Miller, our CEO.

[Mickey Miller:]

Thanks, Belinda. I'd like to welcome you all to the Vislink Q2 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 full-year results and the progress we've made in the second quarter of 2021. We also provide an update on our latest developments in future prospects. Participants will be able to submit questions during the webcast from the main webcast page. We will try to take as many as possible at the end. We're very pleased to report revenues in the second quarter that were 85% higher than the amount recorded in the first quarter of 2021. In addition, our quoting activity continued to increase with new bookings growing over 250% during the first half of 2021, compared to the corresponding period in 2020. This accelerating sales growth, together with our ongoing focus on cost containment and strategic use of financial resources, helped us significantly narrow our EBITDA loss in the Second Quarter to 578,000 compared to 2.4 million EBITDA loss in the First Quarter. As a result, our operations have not only returned to pre-pandemic levels, but we are well-positioned for future growth. Just some side comment. I thought this was a great quarter for us. Let me just put it in perspective, 18 months ago when Mike and I started here, this Company was under-capitalized, it was in debt with our vendors. We had a very high operating cost, our new product development was anemic, and the business was declining year-in and year-out. And then we were hit by the pandemic. The team at Vislink did an extraordinary job. We had furloughs that effectively put in a 40% pay cut for all senior management in many levels of management. And everybody in this Company paid a price in their salaries to be able to keep this Company moving forward that we were able to get to where we were at the end of 2020 with the opportunity to raise additional capital. So, I want to give credit to the entire Vislink team for the extraordinary job and sacrifice that they've made for this Company to get us here. And I'm super excited about the future that we've been able to build and the future is now for us. Because our commitment to relentless innovation, which has been a Vislink strength throughout its history, resulting in a release of incredible products in 2021, including the IP Link 3.0, the Quantum Receiver, and the DVE6100 that have already played a role in capturing substantial new business this year, including the announced wins with Alabama Public Television and the U.S. Department of Defense. In fact, these three products alone have already surpassed 6 million initial sales this year. We plan to continue to aggressively refresh our product offerings to maintain our leadership in the markets we operate. We have increased our R&D investment, and we have recently hired a new head of R&D, John Gass. We are very excited to have him part of the team. You also know about our very exciting news about closing on our purchase of mobile viewpoint. The acquisition allows us to explore a number of significant trends with respect to the market for live video. Each can be addressed by mutual Mobile Viewpoints' innovations and bought its cellular, 5G, and AI-driven automated production technologies. These included the following

[Mike Bond:]

Thanks, Mickey. And good morning, everyone. Here are some of the main financial results for the First Quarter. Revenues for 3 months ended June 30th, 2021, were 7.6 million. And by the way, that does not include 4.3 million of deferred revenue. That compares to 4.1 million for the First Quarter of 2021, and 6 million for the 3 months ended June 30th, 2020. EBITDA, which is earnings before interest, taxes, depreciation, and amortization, was a negative 578,000 for the 3 months ended June 30th, 2021. That compares to a negative 2.4 million for the 3 months ended March 31st, 2021. We ended the Second Quarter of 2021 with 55.5 million in cash and cash equivalents compared to 60 million at the end of the First Quarter of 2021. Gross margins were 52.8% of revenue in the Second Quarter of 2021. That compares to 46% in the First Quarter of 2021. Net loss attributable to common shareholders was 834,000 or $0.02 per share in the Second Quarter of 2021 compared to a net loss of 2.7 million or $0.07 per share in the First Quarter of 2021. And a net loss of 778,000 or $0.05 per share in the Second Quarter of 2020. Net loss attributable to common shareholders was 3.5 million or $0.09 per share for the 6 months ended June 30th, 2021. That compares to a net loss of 5.2 million or $0.45 per share for the 6 months ended June 30th, 2020. I will now turn it back over to Mickey to provide an operational update and an outlook on the business. Thank you.

[Mickey Miller:]

Thanks, Mike. The numbers that Mike just shared with you don't include the 4.3 of deferred revenue that if you look at the K, our 10-K, which basically means we built, we shipped, and we delivered 4.3 million of goods to a customer that didn't make it through customs through the end of the quarter so we were not able to recognize as revenue, but that revenue has now been recognized and payment has been received. So, it was a heck of a quarter. And again, I want to extend my thanks to the entire Vislink team. You as owners of our Company should recognize that our Vislink team did a heck of a quarter here, and we're only getting started. So from an outlook perspective on the broadcast live production side, we're really starting to see a resurgence in this market as live events have made are robust comeback. Obviously, with the Delta variant, there is some uncertainty there, but we are starting to see a robust comeback as you could see with the first half of this year. We had 250% more orders than we had last year in terms of dollar volume. We expect that the integration of the Mobile Viewpoint technology and products will help us make strong inroads in the Live Production markets as we now have a completely new suite of solutions to offer. We are the first Company now in this space that has the complete suite. Many companies have bonded cellular. Some companies have proprietary networks on custom. We now have the complete suite of products to be able to offer our customers a very compelling solution that is managed by one single software application. On the MilGov side, the MilGov market is showing strength as evidenced by another nice Department of Defense order received in the quarter. There could be some new exciting opportunities for cross-selling Mobile Viewpoint products to law enforcement and military organizations. There are several use cases Mobile Viewpoint has whether backhaul for drones that they've been able to deploy in many first responder locations, as well as cameras on-site during civil unrest or for forensics. So those are exciting opportunities that we're seeing. But we see it as a great opportunity to take the technology, both our traditional as well as the Mobile Viewpoint integrated into the complete solution to provide first - responders with incredible technologies to do their jobs more safely and to proactively protect and serve us. Finally, Satcom, we have reconstituted our satellite product line, in one of our new product offerings in the area DVE 6 has been a nice introduction. So we've basically had two primary products there, our MSAT product, which is our mobile satellite product, where you can deploy anywhere and get connectivity, as well as our new DVE6100. Looking forward, we are optimistic the demand for our key markets will continue to increase for the balance of 2021. While there are some potential challenges on the horizon due to forces outside of our control, such as the ongoing battle to manage COVID around the world, at this point in time, we are forecasting increased demand for the sectors we operating in. As a result, we see considerable opportunities to grow our business, and having Mobile Viewpoint as part of the Vislink family will certainly help make that reality. We look forward to updating you on our progress. Now we'd like to answer some questions that have been submitted during this webcast.

[Operator:]

Thank you. We will now begin the Q&A session. You may submit online questions at any time today using the window on the webcast. At this time, we will pause momentarily to assemble our roster of questions.

[Mickey Miller:]

First of all, I want to thank everybody for the questions that we have. As you've probably seen through our social efforts, we're trying to connect with our owners. You are our owners. You own this Company. We want to connect with you and understand what's on your mind and address any questions that you have and be transparent as we can be. Obviously, we have NDAs with many customers. We would love to put out press releases every day and videos of our product being used in the world. But we're only allowed to do that when our customers approve and allow us to do that. And certainly, we're not able to disclose anything that's under NDA with customers, but we will be able to talk about any customers that have allowed us to talk about things. So I think the first one -- I think --

[Mike Bond:]

The first

[Mickey Miller:]

The only thing I want to mention --

[Mike Bond:]

--the question is about -- I'm sorry, go ahead.

[Mickey Miller:]

Yes. I do want to say, in order to drive questions, we did say we will -- anyone who asked a question that we have on the call will send some swag too. So if you have -- if you do ask the question, please DM us with your information, and we'll send you some swag. We appreciate your support for Vislink and for your questions because we have more questions than ever now and really appreciate it. Go ahead, Mike.

[Mike Bond:]

Yes. Thank you. So, the first question I noticed right off the bat. Obviously, everyone's very excited and I think, curious about Mobile Viewpoint. And so, the first question obviously is how big is Mobile Viewpoint How many people What's their revenue? So essentially they are about -- revenue is about 7 million U.S. We expect obviously some synergies there. We -- the first order of business in terms of integration is to integrate their solutions, their product lining with our own to create a combined go-to-market model if you will, to get out and aggressively pursue our customers as Mickey said, we now feel like we have another weapon in the armory that we can use with our customers and even potentially, new customers. So, again, the revenue there is about 7 million at this point. They've got about 20 people. They do a great job leveraging that number of people with a very aggressive R&D schedule. We think we'll be doing increased additional investment in their product development in there -- with their R&D team. But we're looking forward to growing that business substantially.

[Mickey Miller:]

Right. Here's one. Do I have to worry about another reverse split? I think hell no is the answer. And you can take all the worries you have in your life and put that one at the very bottom of the list.

[Mike Bond:]

As Mickey said, yeah, we look in the past, the Company did a lot of reverses splits because they basically we're funding losses and operations as Mickey has mentioned. But previously, we think we've got the platform at this point to break even and we're looking forward to continuing to progress that. And so we don't see any need to do anything like a reverse split. We think our share price, our capitalization, everything will stay above the minimums. We'll stay listed, and we'll continue to progress in our share price as we build a better platform.

[Mickey Miller:]

There's a lot of great ones here. What came first, the chicken or the egg? I just went ahead. All right, Michael Osmanson, you got ahead.

[Mike Bond:]

You got ahead.

[Mickey Miller:]

Let's see. Mike, there's --

[Mike Bond:]

Mickey, I see one. There's a good one that says that with the new acquisition of Mobile Viewpoint, how do you see integrated into our current -- your current business? And I think I'd mentioned that. We are going to take it easy at first because we don't want to overwhelm a group the size of Mobile Viewpoint. So Michel Bais is their leader. And we think highly of him. We -- a strong part of our reasoning and rationale for doing this acquisition was the talent and the leadership there and their vision. So we're going to try to marry that to our vision and our go-to-market model and progress in a combined fashion with our customers. But on the operational side, we will obviously integrate them financially, but we'll leave them alone operationally at this point. They are in there Outward The Netherlands, and will be -- we anticipate making many stops in the Netherlands, but we want to leave them alone operationally for a while and just integrate their solutions and their go-to-market model.

[Mickey Miller:]

I think this is a pretty common question. I think 3 or 4 times is, does Mobile Viewpoint already have Starlink capabilities? Let's start to be by Starlink. So, I think, what our goal is and what we've talked about, if you've seen our investor deck, it's about taking advantage of the connected edge opportunity that we see. Cisco expects over 500 billion IoT devices connected by 2030. Our view is that in the next 10 years, every industry will be disrupted by the Connected Edge. And what that means is that everything will be connected on the edge; machines, people, devices, you name it, and that impacts the industries we're in but also future industries that we may be in. And we see that video -- to put things in perspective. Historically, the video was handled over a proprietary network, audio was over a proprietary network, data over a network. Now with IP, internet protocol connectivity is everywhere, with IP, it's just one packet. That packet can have video, audio, metadata, you name it, and can be distributed over any medium, whether it's 5G, whether it's WiFi 6, whether it's mesh, whether it's a proprietary custom, whether it's Starlink, whether it's great whatever link. And that's what we want to make sure that we can offer our customers; an opportunity to use whatever link they -- is most economical and fits their needs, meets their needs based on the use case that they have to be able to connect their entire network. Because what's important, you know historically, companies as having always had an IT department. But the future is that IT or connectivity or data and massive processing power are all going to be one. And so the operations are being disrupted to be able to leverage to use these tools. To be able to do that, you got to have connectivity and you've got to be able to work across all types of connected devices. And so that's our goal. In addition to the AI, with Mobile Viewpoint, we get an AI capability that helps us move forward our AI expectations and goals and then ultimately with big data for real-time analytics that will disrupt traditional workflows. So that's our future. That's where we're headed. And that's what the relationship is today, is yet another medium for us. But we see a lot of opportunities across the board to do a lot of things with a lot of different customers. Because we have this ability to bring things from the edge and create information to fulfill our mission today. Our mission today is to create technology that serves and protects us and connects us to the content we love. That's our mission today. But as we build and we do well there, there'll be opportunities to take the technology we have and the capabilities we have to other markets to do the same thing.

[Mike Bond:]

Question from Peter Tolattis. He said congrats on the acquisition, and he said, "My question is about the supply chain. Do you anticipate any supply chain disruptions?" He said, "You had in the first quarter." And we still feel the same. We don't think we'll have any major supply chain disruptions. We do see the supply chains tightening up. We are taking, obviously, some defensive measures. We're ordering out ahead of in some cases, our orders on key parts and supplies, but we don't anticipate that becoming a factor in terms of our ability that meet our customers' orders.

[Mickey Miller:]

Thanks, Mike. Here's another one. When do you expect Vislink to become profitable? We don't give guidance. There's a lot of things going on in the world. Still, today, as I mentioned, the Delta variant, we'll see what happens there. But I mean, if you just take a look at this past quarter. Is that deferred revenue would have cleared customs one day before? Do the math, I was 4.3. You know what our average margins are. And so that would have dropped over $2 million to the bottom line. So I think that answers your question.

[Mike Bond:]

Yeah. And just to add to that, look we had a very difficult platform to work with as Mickey mentioned when we first started, we think we've done a lot of yeoman's work in terms of making the platform able to create profit as we increase sales, to drive leverage. We went through a very difficult time with the pandemic, it essentially put a big part of our business on hold, that is live production. We're now seeing a major increase in our order activity and quoting activity. So, we think the live production business is coming back strong. We have every confidence, again, as Mickey said, that the business is going to come back and go back to pre-pandemic levels, and we feel like the work we've done on the platform, the money we've raised, some of the strategic opportunities we're going to address, including Mobile Viewpoint, gives us a real leg up in terms of being able to create a profitable platform in the future.

[Mickey Miller:]

Here is a question from John Hammer

[Mike Bond:]

Here's a question. It says, Do you anticipate additional acquisitions? Are you continually looking for new opportunities? And the answer there is absolute. We get a capital raise as you know back in February. We just spent a bit of that in cash to acquire Mobile Viewpoint, we still have what I'll consider as good dry powder to do more strategic work. We also reserve the opportunity to go to the market again if we're successful and raise more capital to do more strategic acquisitions, but we will not stop. We'll continue to look at opportunities to grow the business inorganically and jumpstart the platform if you will.

[Mickey Miller:]

Here's a question from Jessica Dalton

[Mike Bond:]

Yeah. And Mickey, that plays into a question by John Rutherford (ph) here that he asked, when do you see the revenue from the acquisition hitting the bottom line? When do you see the impact, basically, And the answer there is almost immediately. Michel has run a great organization that's very profitable. We do expect to see, obviously, additive revenue and additive bottom-line impact almost immediately. So where -- that's where very excited about that. We didn't purchase a burn rate. We actually purchased a business that's up and going, profitable, and produces cash, and runs very well. So we're very excited about that as well.

[Mickey Miller:]

From Billy Philips, when do you anticipate being operationally cash-flow positive paying shareholders dividends and what are the key drivers to financial health and growth? We kind of mentioned -- answered this in one of the earlier questions. If you look at the numbers for this past quarter, I think that will answer that question, but our focus when we started off in this -- a little over 18 months ago, would have said to get the cash flow positive. Now paying the dividend, we think there's tremendous opportunity here. So we don't think this will be a dividend stock. But if we look at everything and we say, hey, the best thing to do is buy back stock or give a dividend. If that's the best use of capital for our shareholders, we'll do that. But right now, we see the tremendous opportunity because of the Connected Edge opportunity to invest that you'll get outside returns through the investments we make.

[Mike Bond:]

There's a question from Mark Filmer(ph). You said gross margin increased by 10% in the second quarter to $52.80, he said, is that your target margin? Sorry. And the answer is yes. Essentially it's around 50% to 55%. Obviously, with product mix, some of our products enjoy higher -- much higher margins and then some slightly lower, but that is in general where we think margin should stay going forward.

[Mickey Miller:]

Here's another question

[Mike Bond:]

Small world.

[Mickey Miller:]

The other question.

[Mike Bond:]

From Ethan --

[Mickey Miller:]

Go ahead, Mike.

[Mike Bond:]

Sorry. Here's one from Ethan Bing(ph). Hi, Ethan. He says, Hi, Mike. What impact do you think the Mobile Viewpoint will have on margins? And the answer there is, we think it will be positive. Mobile Viewpoint has very good margins. In some cases in excess 60% and almost up to 70% in some cases. But we do think it will have a positive uplift on our margin potential, and we're looking forward to integrating the -- integrating those products in to reap that benefit.

[Mickey Miller:]

Yeah, here's another one. Please discuss how much success you or someone on your team has with acquisitions. What dollar amount? Personally, we did a lot of acquisitions in growing the Andrew Corporation, I've done a lot around integrations, but I think our acquisition guy, none better than Mike Bond here. He's done over $30 billion of acquisitions in his career. He led this acquisition, he spent 4 weeks in Amsterdam bringing this to a close, and he's got tons of experience, he was at JP Morgan for a while, so we're really excited that we have Mike on our side to lead our acquisition.

[Mike Bond:]

Thanks, Mickey. Here's one from Ethan Ding. I think, Ethan, this might be your second question. You're doubling down here. You said the purchase agreement did not explicitly prevent Triple from hiring Mobile Viewpoint talent. He said, How do you plan to retain the talent and bridge the act of the two cultures? Great question. One, we don't think there's any problem or vulnerability to having our people leave to go to Triple. They're two different businesses. And so, therefore, we don't think there's really a problem there. In terms of integrating our cultures and incenting people, we do have a -- what Mickey and I consider as a fairly aggressive incentive plan inside the Company. Both bonus and competitive salaries. Obviously, we reviewed with Michel the team, and we looked at the key players, and all the players, and we look forward to making sure that all of them are excited to be a part of the Vislink family going forward. So we will do the hard work in terms of looking at our people's costs and making sure that everybody is competitively compensated and is feeling comfortable in their role at the Company. So we're very excited to bring the 20 people of Mobile Viewpoint into the family if you will.

[Mickey Miller:]

Yeah, here's one from Anthony Telamon (ph). I understand the nature of NDA as I've seen Vislink mentioned as a partner with Tesla and Starlink. Can you confirm or deny or give any information as to whether this is true? Look, like I said earlier on, we would love to talk about every single one of our customers, but if we confirm or deny something, then you got to know by deduction whether we're doing something or not. Does that mean it doesn't make sense to have any at all. So, I can assure you, if we're allowed to talk about any customer or have video from that customer, we will. As an example, the Olympics of course. You can't put anything about there about the Olympics. The Olympics, they obviously you make a lot of money through the rights that they have. So the only way we can do that is if someone sees a Vislink spotted, so I know a lot of you don't like our Vislink spotted stuff, but if it's in the public domain and someone sends us a picture, we can use it. If one of our partners shows them using it, we can use it, but we can't use images that are owned by other properties. And so -- or talking about customers that we haven't had permission to talk about. So we'll continue to do that, I know it's frustrating for a lot of people, but as I said, we're very focused on building this business, on growing the Connected Edge, bringing that to the markets we serve today, and building that from there. As I've said many times, Mike and I did not come here to run a small Company. We see a massive opportunity here. We see the opportunity to build Vislink into a very successful business. And that's what we focus on every day. We'll have time for one more question. Mike, you want to take that --

[Mike Bond:]

Yeah, Mickey -- yeah. Here's a good question and it's from John Rutherford. It says, To be clear, we have a $4 million revenue we didn't get reported question mark, and that's referring to the deferred revenue that Mickey spoke of in the body of our text. And here we had an order and we've disclosed this in our 10-Q. We had an order for the U.S. Army that we were originally going to ship to Afghanistan. That shipment was diverted to a different location and given the complications of that -- of diverting and accepting that shipment, it missed by about 2 days in terms of being accepted and included in the revenue for the second quarter. So accounting rules say that we shipped it, so, therefore, it's revenue, but it's deferred revenue. We don't -- we defer it and recognize it when it's accepted by the customer. That's the terms of the contract. So given that, we do defer it. It's in deferred revenue at the end of the second quarter and will be picked up as revenue in the third quarter.

[Mickey Miller:]

Okay.

[Mike Bond:]

And Mickey, as you -- one more quick question. Someone asked a good question about the PPP loan, has it been forgiven? And the answer there is, we have made an application, we have done the calculations and we believe that yes, we will -- it will be forgiven in its entirety and we won't owe anything to the government in terms of paying that loan back.

[Mickey Miller:]

Okay. Alright. Well, let me just close. I think we have a great opportunity here. I think we've made progress quarter-on-quarter, in terms of getting the operating platform that we need to be successful. The new product development capability that we need to be successful. And now with Mobile Viewpoint acquisition, I think we have a tremendous opportunity to continue with our mission, which is to create technology that serves and protects us, and connects us with the content we love. And we'll continue with that, but we do see a bigger play in other industries as well around the Connected Edge. I think it's going to transform and disrupt every industry today. I think there's a tremendous opportunity for us to take advantage of it, given our skill sets and our capabilities. The video combined with audio combined with metadata does tremendous things in many industries, whether it's insurance, whether it's insecurity. There's the capability that we have around that I think can be deployed in a lot of different areas. But our focus is this initial market that we are involved in of media and entertainment, and first responders, and Milton. As you can see with our customer base is Department of Defense, Alabama PBS, we have some long-standing relationships with some very large customers. And we think, there are opportunities to build on those as well as opportunities to grow and share, and with the Mobile Viewpoint acquisition, we think that gives us more opportunities and more products to be able to position Vislink as the supplier of choice as our customers make decisions on what their new technology going forward is. Thank you everyone for your support for Vislink. You are the owners of the stock. We want to communicate with you. We'll continue to try to find the right tempo of communication. We want your ideas. Now with Mobile Viewpoint. This is a product that can be sold in a lot of different places. I think we're going to see someday with their IQ product, that content that heretofore wasn't accessible, like Division 2, Division 3 type athletics that will be possible because of the cost-effectiveness that will be remote-produced, AI-driven. So do you see opportunities that are interesting? Send it to us because we'd like our sales force to follow up on that. But we see a great opportunity for our shareholders to help us identify new opportunities in those lower-tier markets, as we continue to grow. Thank s again, we appreciate your support.

[Operator:]

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