Vislink Technologies, Inc.
Q3 2021 Earnings Call Transcript

Published: 16 Nov 2021

[Operator:]

Welcome to the Vislink Technologies 2021 Third 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:]

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.

[Mickey Miller:]

Thanks Belinda. I'd like to welcome you to the Vislink Q3 2021 earnings webcast. I'm Mickey Miller and I'll be joined on this webcast by Mike Bond, our CFO. We'd like to take this opportunity to report our financial results in the progress we've made in the third quarter of 2021. 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 Wayne webcasts page. We try to take as many as possible at the end. We are very pleased to report that our revenues in the third quarter grew sharply to $11.2 million, which represented a 133% increase year-over-year in over 47% sequentially. In addition, to accelerate our sales growth, we also grew our profitability substantially over prior periods, recording EBITDA of over a million dollars in positive quarterly net income. This is a testament to our pursuit of realistic sustainable growth of a business, while maintaining an unyielding commitment to cost containment and operating efficiencies across the organization. I'd like to mention some notable business highlights from the third quarter. First we finalize our acquisition of Mobile Viewpoint. I want to reiterate that we feel this represents a perfect complement to our 50 years' experience developing and deploying advanced video solutions. And those solutions to our existing offering. Expands our capabilities in the areas of bonded cellular and 5G communications, AI driven studio and sports production, remote live streaming and drone backhaul solutions. As a result, whether a business opportunity presents itself that requires a private 5G network, a public 5G network, AI power production or any hybrid combination of these, we have a market leading options offer. This is why we believe that we have now have a truly best of breed set of products in our arsenal. The Mobile Viewpoint acquisition has already begun to bear fruit, namely the launch during the third quarter of Vislink Connect. This is the first jointly developed product offering brought to market by our combined companies. Vislink Connect is designed to enable robust, reliable and economical transition of live video production. Most importantly, it provides a variety of data plan options and predictable cost. And this is what sets it apart from other solutions currently in the market. We feel this is a very strong potential for us. We expect to launch additional solutions over the upcoming quarters that leverage the respective innovations of both Vislink and Mobile Viewpoint. We're very excited about the new product releases that are coming down the pipe. We also had a variety of our video communication solutions deployed at events held during the Summer Olympics in Tokyo. Vislink wireless cameras and related components were utilized by our broadcast service partners and Mobile Viewpoint deployed 75 cellular encoders for outside broadcasts, as well as its TrolleyLive product. TrolleyLive is professional studio-in-a-box solution designed to allow to live streaming from home, office or any other location around the world. We believe it has a lot of sales potential. During the quarter we also participated in the world's first standalone 5G network introduced in MotoGP. This took place at the British Grand Prix race, where we collaborate with Dorna, BT Sport, the University of Strathclyde to showcase the first live sports broadcast over a 5G network. This proof of concept system was considered highly successful, and showed how standalone 5G networks are very suitable for broadcasting live video even under the challenging conditions of high speed racing. We're excited to be on the ground for this innovation and look forward to commercializing in the future with our industry partners. We also introduce new product innovations during the quarter. These included updates to the Quantum receiver, a portable version of our IP transmission system, and satcom products like the DVE6100. These product families have continued to be among the company's most well received in the market. At the same time, we continue to refine our product catalog. We reduce our overall product SKUs available for sale, removing items that cost us more to keep in production than to realize revenues from. We've also been standardizing our solutions, making more modular wherever possible. This has a twin benefits of making items more reusable and also allows us to react more nimbly to opportunities that may arise which may require reconfiguration on the go. I will now turn it over to Mike Bond, who will walk you through our financials.

[Mike Bond:]

Thanks, Mickey. And good morning everyone. Here are the main financial results for the third quarter. Revenues for the three months ended September 30, 2021 were $11.2 million that compares to $4.8 million for the three months ended September 30, 2020, and $7.6 million for the three months ending June 30, 2021. Revenues for the nine months ended September 30, 2021 were $22.8 million. That compares to $16.1 million for the nine months ended September 30, 2020. EBITDA which is earnings before interest taxes, depreciation and amortization was $1.04 million for the three months ended September 30, 2021. That compares to a negative $2.4 million for the three months ended September 30, 2020, and a negative 578,000 for the three months ended June 30, 2021. We ended the third quarter of 2021 with $38 million in cash. Gross margins were 62.3% of revenue in the third quarter of 2021, which compares to 31.8% of revenue in the third quarter of 2020 and 52.8% of revenue in the second quarter of 2021. Net income attributable to common shareholders was $676,000, or $0.01 per share in the third quarter of 2021 compared to a net loss of $2.8 million or $0.17 per share in the third quarter of 2020. Net loss attributable to common shareholders was $2.8 million, or $0.07 per share for the nine months ended September 30 2021, which compares to a net loss of $8 million or $0.61 per share for the nine months ended September 30 2020. I'll now turn it back over to Mickey to provide an update and an outlook on the business in our markets. Thank you.

[Mickey Miller:]

Thanks, Mike. Looking forward we see the following in store for key market sectors. In a broadcasted live production market, demand is strong. Opportunities for growth in the U.S. are increasing as live events continue to make a comeback. International, there's areas that remain strong for our business, in particular Middle East. Other areas have some challenges, as COVID resurgences have impacted the holding of live events in some places although we expect to see recovery in the near to medium term. We're confident with the addition of Mobile Viewpoint to our family. We now offer a comprehensive range of technologies that can deliver more effective coverage of global sporting events with lower production costs and increased opportunities for content development. The MilGov markets continues to present us revenue opportunities particularly with additional military and law enforcement targeted solutions that Mobile Viewpoint provides. We've been asked whether there could be opportunities related to the recently passed Federal Infrastructure Bill. And we believe there definitely could be. You'll recall that the bill marks over $550 billion in new spending on resiliency upgrades to the nation's roads, bridges, pipes, ports, airports, public transports and other public works. Vislink mobile video surveillance and security solutions can play a pivotal role in enhancing such resiliency by delivering real time information on emergency and critical infrastructure, helping to optimize performance and monitor potential threats. Also, the $65 billion allotted towards broadband presents an opportunity for IP link product line, the SATCOM market continues to present opportunities to us and we have seen a new COVID activity since we refreshed our satellite product line earlier this year. In summary, we believe there is no other company today that can deliver live video solutions that are immersive, immediate and intelligent as we offer fully engaging experiences for viewers through unrivaled video quality, reliable low latency transmissions using the latest cellular technologies, and the intelligence of AI powered systems that allow a wider range of content to produce profitably than ever before. In conclusion, we're more optimistic about the future than any time in the company's history. Previously, we said we would stay laser focus on operating Vislink with a mindset of financial discipline and that's exactly what we tend to do. Our balance sheet remained strong and our operations remain lean. We also said we would make intelligent investments in product solutions and acquisitions where they made strategic sense. And this approach would allow us to achieve profitable growth. This is also what we have done. And we will continue to do so moving forward. That means aggressively refreshing our product offerings to maintain our industry leadership, and continuing the trend of innovative launches we've had in the first three quarters of this year and executing on business opportunities and the markets we operate in were prudent and profitable. We're confident that we're well positioned to execute on the work ahead, and we look forward to updating our shareholders on our progress. Now we'd like to answer some questions that have been submitted during the webcast. Mike, you want to take the first one?

[Operator:]

We will now begin the question-and-answer session. .

[Mike Bond:]

Mickey, I will take the first one.

[Mickey Miller:]

Okay.

[Mike Bond:]

Are we back on?

[Mickey Miller:]

Yes.

[Mike Bond:]

Hey, thanks, everyone. So first question obviously is one that's on everyone's minds these days and that is supply chain. And so the first question comes from Kumar and it asks, how is your supply chain situation? And it's a very good question. And the answer is that we watch it every day, Mickey and I have meetings with our supply chain people almost on a daily basis. We did take steps in the last couple quarters to protect that supply chain, we did make some strategic purchases, and put things on the shelves that we felt could in fact become scarce. We do see a tightening of the supply chain, we are cognizant of some of our more critical components becoming a shorter supply. So we are in fact, taking extreme measures to make sure we scour the entire supply chain to make sure we keep up with that. And we protect ourselves as much as we can't given the current situation. The compound question was that what happened to your newly hired VP of supply chain? We did announce that we had our Joe Carson to help us rationalize our supply chain to help us with our strategy on manufacturing. Joe came in and did a terrific job, helped us with that strategy and has since moved on to other opportunities in a mutually agreed upon fashion. So thank you Kumar for the question.

[Mickey Miller:]

Okay, next question we have are you able to disclose how many NDAs you have in place with other public private companies or local governments? That's a good question. I'd say, probably, close to -- actually Belinda what do you think? I would say it's 100. But you Belinda manages that for us so.

[Belinda Marino:]

Yes, I'm going to say it's closer to a 110 that we have.

[Mickey Miller:]

Yes. So, and obviously, some people there's other questions of, okay. We can't wait to those expires. So you can talk about it. But many of those have a tail. But once they do expire, you still can't talk about it. The other question we have is around the Mobile Viewpoint acquisition, what are the areas of potential growth you see? Mobile Viewpoint. First of all, when we made the acquisition, we talked about how a live video was only 13% of the overall video on the internet. And it's growing at over 70%. So that was a large opportunity that we saw by combining the product offering a Mobile Viewpoint with our offering. Because with that, we now have every conceivable solution to bring video to streaming. So whether it's through our own proprietary custom solutions, whether it's through public networks, whether it's through private networks, or through satellite like Starlink and other satellite networks. By doing that, we have been more than anyone in our industry, the ability to serve our customers. But the interesting thing to the acquisition we found was the AI the artificial intelligence that Mobile Viewpoint has been working for. Our customers are super excited about and we're talking with a lot of them. What AI will allow our customers to do were historically, say Division 2, Division 3 types of sports, they were too expensive to live produce, because you hadn't sent camera crews. Now you can send artificial intelligent cameras with a complete suite of production in the cloud. And you'll be able to produce a professional type of production at a much lower cost. So this is going to allow lower value content to be produced live. So everyone can enjoy whatever particular sports or activity or entertainment that they enjoy watching. And so we've been really enthused about the receptance of our customers, and the energy and excitement around the potential that AI driven cameras can do for their contact, as well as for their overall businesses, or university. So we really excited about that working through here in the U.S. Mobile Viewpoint historically has been successful in Europe with those types of Europe and Middle East with those types of solutions. And now we're bringing those to the U.S. So we're really excited about that.

[Mike Bond:]

So the good question someone asked, are you going to continue on your strategy of acquisitions after Mobile Viewpoint? The answer is absolutely, yes. We have raised a significant amount of funds. We do still have a significant amount of cash on our balance sheet. As we've shown this quarter, our near and middle-term goals are being achieved. We've stabilized our business platform, we've minimized and mitigated the loss of money each quarter. We hope to move into profitability obviously. We think that bodes well both to the shareholders and the stock price. And we think that also gives us the opportunity to go out and add and layer on additional capabilities onto our current platform. We look at that in two ways. One, we'll do it through acquisition. And we'll do it strategically through new product development and engineering and R&D. But we will continue to be very aggressive in terms of going out in the market looking for opportunities to add accretively to the platform that we've created today. Thanks for the question.

[Mickey Miller:]

Thanks, Mike. We had a question Vislink was the first to have 5G at sport events, particularly Moto GP have leagues here in the U.S. shown any interest in the same equipment? That's a great question. Let me just tell why I think what we've accomplished with Moto GP is so important. First of all, we did this in cooperation with BT Sport, which is basically the ESPN of the U.K. Dorna who are the rights owners of Moto GP. In the U.S., a lot of people aren't familiar with Moto GP, but outside the U.S. it's a hugely successful brand. They've been able to take Motorsports and make it so immersive through the technology partnership that we've had over the last 20 years to bring in super exciting content to the public. And by working with them when Moto GP and Dorna are innovators of really immersive, really incredible type of viewing. So for instance, this past weekend, they were the first to display a shoulder cam using our technology in Valencia. So, what this does? What 5G does for us is basically because 5G is more spectral efficient meaning you can put more bits through the pipe. And because of more spectrum being available, and because of MIMO antennas, multi-in and multi-out antennas, you have more pipes. So more bits through a pipe is more pipes allow you to do a lot more things. So many more cameras, everything from in the case of MotoGP, we're doing four cameras per bike we're able to increase that, and then more cameras around the track. But think about typical NFL football game, my goal is to be able to put a camera in Tom Brady's helmet before he retires. But those kinds of POV shots, really immersive type shots to get the viewers right in the middle of the game, I think are really realistic when you have the type of 5G network that we're working on. Can you imagine Aaron Donald chasing down Tom Brady, and you're able to see it real time, I think that'd be phenomenal from his perspective. But when you think about that, it's not just now video, but it's also biometric data. It's auto data, it's engine data. It's every bit of data now that we can move through these pipes. And so there is a lot of different use cases now can occur in a variety of sports and writing entertainment. And we take those same technologies we apply them to the military and government markets that we work in. So this is the beginning of what we call the Connected Edge, where everything is connected. You combine that with big data and compute on the edge, and you're able to do some things that heretofore we weren't able to do. So we're really excited about our first step with MotoGP. We've got a lot of people interested in doing similar type of demonstrations. And we're working with those partners to work through those. But we expect this to be very positive here in the U.S. as well as around the world.

[Mike Bond:]

Thanks, Mickey. Here is a question from . Antonio asked kind of a two part question. One is, regarding MVP, our most recent acquisition, do they sell hardware to B2B rental companies? And the answer there is they don't sell to B2B be rental companies at this point. But they have looked at a leasing model and they have leased equipment on occasion. We think that's an interesting idea and aspect of the market, we think it would be attractive to approach some of our customers from a OpEx perspective rather than a CapEx perspective. And we are looking at that, it does require us obviously to put a piece of our balance sheet at play, and/or find a financial partner that with least with us, but we are looking at that. We think it's a highly attractive aspect of the markets that we think we'd like to look at. The other part of the question was, can you provide the financials of Mobile Viewpoint. We will break out separate financials from Mobile Viewpoint ongoing. We did file a most recent 8-K that did describe that business before acquisition. So I'll refer you to that AKA for standalone financials. But they are profitable business. We think it remain a profitable business. We will integrate them from a sales channel perspective. From an operational perspective, they are over in the Netherlands, and they do operate somewhat autonomously. We are integrating their products with ours. And we're very, very excited by the prospect of what Mobile Viewpoint brings to Vislink. So thanks for the question, Antonio.

[Mickey Miller:]

Thanks, Mike. We have another question. How are sales doing internationally? I think when we look internationally, there is good and bad spots. I think Asia, Asia typically was over 15% of our sales. It's down under 5%. COVID still is challenging many Asian countries. So we think that will be longer to turn around. But we're encouraged because we're able to hit the numbers that we've been able to hit with slowness in Asia. Europe just coming back. The Middle East was strong is strong for us. And the U.S. is strong. But in the U.S., our first responder's sales where we typically see higher numbers during this time. We have a lot of decisions have been pushed out. So we haven't lost the opportunities. They've just been pushed out, as governments try to sort out, what revenues look like and what budgets look like, as well as what potential federal funding may be coming down the pike. So I think we'll see 2022 to be strong in the first respondent that we haven't seen. But overall, we're pleased that we're able to achieve these revenue numbers having slowness in some of our key markets.

[Mike Bond:]

Nice, Mickey. We get a lot of questions today, and it's more than just one person asking about our share price, and obvious we don't give guidance. We like not to comment too fully on the share price. When I came into the business a little more than a year and a half ago. And our theater first goals were to stabilize the company, stabilize the platform, engage the vendor base, get things moving again through the supply chain, and get the operations and manufacturing rolling again. We think we've achieved that. We think we've done a long way towards rationalizing what was the old Vislink what is today. And to that end, we've rationalized the product line, we've streamlined the operations of the company, we reduce the breakeven point down substantially. We feel like we've done a lot to achieve what we considered our near term goals. Medium term goals are to continue to go out, evangelize our customer base, provide and introduce new products, and invigorates the sales channel and invigorate the sales process, we think we've started to see that happen. I think this quarter is good evidence of that $11 million of sales is historically high for this company. So we feel like our midterm goals are being achieved. Our long-term goals are to continue to add to the platform to strategically go out and look for acquisitions and opportunities to engage people in adjacent markets and to look for new ways to sell our products. We think if we can execute on all those things. We think the share price will take care of itself. And we'll have an increase in value. And that's the way we look at the share price at this point, we think hard work step-by-step progress will eventually pay dividends. So thanks, everyone for those questions.

[Mickey Miller:]

Thanks. We have another one from . Do you think you'll achieve profitability without any further dilution? Yes, we have. We will achieve profitability. And as we said, from the beginning, our goal was to with our current platform to continue to generate cash and be profitable with our existing platform and then add to that, I think we're in a position to do that. There's some other questions on here around do we have a reverse split or dilution plan? No, we don't. We believe as you know, we have $38 million of cash. We're generating cash. And so we think we can continue to do this, given the markets that we're in and the opportunities that we see with the new products that we've introduced. So we're encouraged by what our customers are saying to us around our products and how excited they are. For instance, our Quantum Receiver that we introduced earlier this year has been a massive success. We see as a native IP receiver for our proprietary networks. We've seen that deployed, as we said in the Olympics, and major sporting events around the world. And a lot of our partners are gearing up with that today. So we're really excited about the products that we've had in the new products, we'll have a new introduction, similar platform introduction in our first quarter of next year that we're very excited about will be for our first responder market. So I think as Mike says we continue to focus on innovation and generate new products to work closely with our customers, we think there's tremendous opportunity to grow this business, continue to generate cash. And then on the M&A side, we'll do both complementary and also areas that we see growth. And as investors, you need to understand that we are super focused on cost and cost containment, the ideas of the past Vislink of not been as focused on that are gone. We're very focused on that, we'll continue to maintain our discipline in that area.

[Mike Bond:]

Thanks, Mickey. Good question from Hassan. Hassan has asked us, why are some of your operating costs going up? For two reasons, one obviously, we've shown a lot of discipline in our operational cost structure. But we have experienced some public company costs like D&O insurance, and other things that just go up unavoidably. We can't help that, some of those costs are rather large. We've also invested to some extent in more additional R&D and engineering, we feel that we were a little bit underserved, a little bit undermanned there. So we have increased our spending in places where we really feel it will provide the maximum amount of benefit. And then we also going forward well, as you'll see, we'll combine the results and the expense streams of Mobile Viewpoint into our own that will obviously entail an increase. That will be obviously more than offset by the revenue that we will add to the top line. So thanks for that question.

[Mickey Miller:]

Okay, we will have one more question then. Maybe we'll do two more questions. One on the how our subscriptions going with bonded cellular, we introduced The Vislink Connect a few weeks ago, we're getting interest there. We've had some demos that have been acquired. It's still early on for that product. But we continue to build on that and have a complete suite of products to support that. But we're encouraged by the reception that we're seeing. But I would say that the AI cameras are the area that a lot of customers are focused on. It's new, it's different. It's super innovative. And I think they can do a lot of things that for their content creation. Let's go to one more. First of all, thank everybody for the questions. You see one Mike.

[Mike Bond:]

Yes, just another kind of Pablo asked a question that I think has been recurrent in the questions is do you think you can achieve and sustain profitability and there the answer is absolutely. Mickey and I have, I think put a lot of hard work into trying to stabilize the company, rationalizing again the supply chain, the operations, the headcount, our operating expenses, we've endeavored to kind of reinvigorate our channels. And we think that that has bode well for the company, we think this quarter is indicative of all the hard work that the team here at Vislink has put in, and Mickey and I couldn't have done it without an incredible amount of effort from our team worldwide. And so we think we've turned the corner, we think we're on a path to increase profitability, which obviously increases shareholder value, we think we have a great opportunity to go add to the company strategically as well. So we think that, we're well on our way to creating a very profitable company.

[Mickey Miller:]

Yes, so first of all, thanks everyone for the questions. And thank you to our long-term investors. We've been talking about our plan and our discipline for the last five, six, seven quarters. And we appreciate that we talked to quite a bit of our investors, and we appreciate the support that we get for those that are in here for the opportunity to long-term. We'll continue with our turnaround plan that we started, when we joined in early last year. And we're starting to see the fruits of our labors of the team throughout the world and the focus that we've had, since what Mike and I joined the company, one thing I could say is we're just getting started, we see tremendous opportunity for this company in the markets that we serve, as well as additional markets to leverage the technology that we now have in other technologies and capabilities that we might acquire. So we're very encouraged by what we see. And we think we have a tremendous opportunity, both in the near-term as well as to make this company like when I started, we said we didn't come here to have a small company, we want to create a company that makes a major difference in this world. And we continue to be focused on making that happen. We've done a lot of blocking and tackling to get us where we now can be profitable with our current platform.

[Mickey Miller:]

And we see opportunities to grow that platform as well to add to that through mergers and acquisitions, we will continue to be diligent in how we maintain our costs and how we deploy our capital. You own this company as investors, we deploy this capital with you in mind to make sure we're going to get the best return for that capital. And we continue to focus on that and you have our commitment to do that on your behalf. Thanks, everyone. Appreciate your questions and we appreciate your support. Thank you guys. Thank you everybody.

[Operator:]

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