Vislink Technologies, Inc.
Q4 2022 Earnings Call Transcript

Published: 27 Mar 2023

[Operator:]

Good day and welcome to the Vislink Technologies full year 2022 financial results. After today’s presentation, Vislink will answer some of your questions as time permits. You may submit online questions using the window on the webcast. Please note this event is being recorded. Before we begin, I would like to remind everyone of the Safe Harbor statement referenced in the SEC filings. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for certain forward-looking statements, including statements made during the course of today’s call. Statements contained herein that are not based upon current or historical facts are forward-looking statements in nature and constitute forward-looking statements within the meaning of Section 27(a) of the Securities Act of 1933 and Section 21(e) 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, planned, target, intend and expect, and similar expressions as they relate to Vislink Technologies and 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 uncertainties of the company’s business, please refer to the company’s various filings with the Securities and Exchange Commission. I would now like to turn the conference over to Mr. Mickey Miller, CEO of Vislink. Please go ahead, sir.

[Mickey Miller:]

Thank you very much. Welcome everyone. We’re very excited to talk about our results for 2022 and about the future of Vislink in 2023. Our mission remains the same

[Mike Bond:]

Sure, thanks Mickey. As Mickey mentioned, 2022 was a transformative year. Revenues were at $28.4 million, and that’s down slightly from last year, and that’s, as Mickey mentioned, due to loss of some pieces of business of legacy products, like the U.S. Army Afghan contract and a few legacy satellite product sales, but we did see strong growth, as Mickey mentioned, in two key segments for us

[Mickey Miller:]

Thanks Mike. As we’re looking at 2023, we think we’re incredibly well positioned for organic, profitable growth. We’ve done some changes in the leadership team last year. The Mobile Viewpoint team, Michel Bais is leading our product and engineering teams; JD, the head of sales, is leading our sales, and Charlotte our marketing, so we’ve made a lot of changes and we’ve just announced a new change - Paul Norridge will be the CFO effective April 1. Mike Bond has done an incredible work since he’s been here. He came here with me in the early days of turning this around, getting us through the pandemic and getting us into the growth position, and we think it now is a great time to make this change as we position this company for growth in the future. The transformation that we started in 2022, we’re starting to see yield benefits already in ’23. The cost reductions will help continue bottom line improvement, and we’ll continue on further cost reductions in ’23. We’ll also increase traction with newer higher margin products [indiscernible] that leverage the latest technology of AI, cloud and 5G, and then Link Matrix will be integrated to all of our hardware platforms, and that’s probably 80% along the way and will be completely integrated. But that really is the ability for us to drive the service and software recurring revenues over time. We expect to have a two-thirds live production, one-third public safety revenue mix, which is a favorable mix for us, and we’re targeting, as we said, 90/10 hardware/software services mix in 2023. As Mike mentioned, we have a strong award-winning product portfolio that was announced last year. That same innovation is increasing and you’re going to see a lot of new exciting things happen this year from a product standpoint. As I mentioned, we plan to double our public safety revenues in 2023. The opportunities are there for not only our new products, but the activities from the local and state level have increased not only with that funding from local and state but also federal funding into the area is increasing spend by many of our customers, so we see a great opportunity to increase that. Drones bring a large opportunity to the table as those get deployed in various areas throughout the country, so we see a growth opportunity there as well, and things like the Cliq, things like our bonded cellular backhaul capability all position well from a drone standpoint. We still see continued growth in live production. We’ve got a great list of blue chip [indiscernible] high quality 4K wireless systems, and it’s not only content owners or broadcasters but every large enterprise is a media company. They have to communicate with their constituents, with their employees and with their investors and customers, and having the capabilities that we have allows them to do that in a much more efficient and high quality way, so we’ve had some really good growth around the enterprise as well. As I mentioned, finally it all comes down to opportunity, how do we identify those opportunities, bring those qualified leads in and then close on them, so we have a very strong pipeline of qualified opportunities that the sales teams are bringing in and working to close, so our focus is on increasing that pipeline as well as closing the opportunities that are in front of us, and so we’re very focused on that, we’re very excited about that. We’re re-energized the product line, the footprint that we have, the team and our customer base, and our focus around providing innovative solutions to those customers, so we’re really excited about 2023. We looked at 2022, a transition year for us where we cleaned up a lot of things, a lot of legacy things. We were able to transition away from a large U.S. Army order and now are positioned with a more diversified customer set, but also the opportunity to grow in defense opportunities as we see those through our initiatives to grow that area as well. Next slide, please.

[A - Mickey Miller:]

Now we’re at the Q&A, so we’d like you to open up, please. We have a list of questions on the website, so if you have any questions, please make sure that you put them up on the website. I think the first one is, are you going to do a reverse split? As you know, in January our stockholders authorized us to effect a reverse split so that we can regain compliance with NASDAQ minimum bid price of a dollar per share for 10 trading days. That’s been voted and it’s been approved, and we appreciate everyone who took the time to vote for that. We’re monitoring our stock price and the various factors to when we think it would be appropriate to implement a reverse split and at what ratio if our stock does not regain compliance on its own. Obviously we’d love for it to regain compliance on its own. [Indiscernible] if we have not regained compliance by then, [indiscernible] appeal any delisting notice to a NASDAQ hearings panel, pending which we fully expect our stock will continue to trade on NASDAQ. As part of that hearing process, we expect to commit to a timeline [indiscernible] requirement, so those are the requirements that we have. As you know, Mike and I have not been big proponents of reverse splits; however, NASDAQ does have a requirement that you be above a dollar, and we’ve had now two extensions, so as I said, we’re going to see how the stock performs. We’re very encouraged about the future of our company and the future of our results, and we’ll implement a split if it’s needed; but as I said, we’ll continue to monitor the situation.

[Mike Bond:]

I think I see a number of questions regarding our outreach to our investors and how we intend to communicate in the future, and let’s just say that we endeavor to obviously keep a full line of communication open with our investors and keep you apprised as much as possible about what we are doing within the company. We have recently taken steps to kind of increase our outreach to our investors. We’re actually engaging a new investor relations PR firm to help us in that regard and we do expect to continue to have increased communications with our investors and our constituents.

[Mickey Miller:]

Yes, good point, Mike. As Mike said, we just retained Gateway IR to help us on the IR side. We know we have an opportunity to improve there, and they’re going to help us. This is the first earnings call that they’ve been a part of and have been on it for a very short time, so we’re very optimistic that we’ll be able to increase the communications with our investor community and keep you apprised of how we’re developing to the goals that we’ve set. Another question I see, do you have outstanding quotations with any military, foreign or domestic, that may help replace your former Afghan income? It was a large program with the U.S. Army over one product with one customer, so we don’t have any of that size with one customer but we do have with foreign and public safety here in the U.S., but foreign militaries outside, NATO militaries outside around our AVDS product line. As I said, that’s a product line that brings a lot of capabilities around surveillance and control, and we’ve got a great reception. Historically, Vislink has been a provider in those areas over years, so we’re a known entity in that area and we’re considered a trusted source for that solution, so we’re very excited about the opportunity we’re seeing there.

[Mike Bond:]

Here’s a question from Peter, who asks what’s our cash position, and I think we had mentioned that we ended the year 2022 with $25.6 million of cash. We expect to continue to manage our cash very carefully. We did invest in some increased R&D last year to bring out some of our new products, and we did also invest in our go-to-market model to make sure we’re enhancing that so we can reach out to these new and more exciting customers that Mickey mentioned, but we do expect to be somewhat cash neutral throughout the rest of the year unless we make an investment in an acquisition or something like that.

[Mickey Miller:]

Okay, we have a question from Brian Kintslinger, the Alliance Global Partners analyst. Can you quantify total revenue from public safety and sports and entertainment in 2022, and adjusting for inventory charge, why was the gross margin abnormally low compared to your recent trends? On the first one, Brian, sports and entertainment is the lion’s share - 90% plus of live production, and public safety in ’22 was 90% plus of the mil-gov segment, as we reported. On the inventory charge--or on the gross margins of 47%, as Mike mentioned, it was largely due to volume and some mix, but largely volume that impacted that, down from our traditional--I think we were at 55 or so the prior year.

[Mike Bond:]

That’s right, and to Brian’s point, there was a small amount of the total write-off related to inventory that did go above the line and did go against our gross margin, but as Mickey mentioned, most of it was purely volume related this year and we expect next year, as I said, for those margins to go back up to where they normally have been.

[Mickey Miller:]

Okay, I’m just continuing to look at the recent--yes. Go ahead?

[Mike Bond:]

Sorry. Byron asked--you can probably answer this better than I, what’s been our ROI and what’s been our experience in trade shows?

[Mickey Miller:]

You know, I can just speak for this year. [Indiscernible] U.K., those are very targeted, so it’s not like you see a lot of potential customers, but the ones that you see are highly qualified and there for a reason, typically to acquire systems. Our strategy from a trade show is twofold

[Mike Bond:]

A question from Byron asks, since Q1 is almost complete, can we give guidance? Byron, we don’t give guidance as a rule, but we are, as Mickey mentioned, very encouraged by the uptick in interest for our new products, our new services. We think this is a prelude to what we think 2023 will look like, which we think is going to be very positive; but again, we don’t give guidance. We’ve not given guidance in the past and we’re not giving guidance for this quarter.

[Mickey Miller:]

Okay, so I’m just scrolling to the bottom to see if we have any additional new questions. I think, do you see current developments on AI as an opportunity for the company? I think everybody’s heard about ChatGPT 4 and the capabilities that can bring. Certainly that capability, [indiscernible] or other AI, like the AI that we’re doing in our current products, ultimately video-centric networks and all networks will be automated. The first part of that is digitize it, so when you look at the journey that we’ve been on in the video world, SDI was the standard not so long ago, and that was effectively an analog standard digitized but not IP based. Now everything is moving to IP-based, and once you’re on an IP-based solution, then it’s very easy to digitize things and automate things, so that’s what we’re working on. We’re working on IP-based COFDM. Obviously our bonded solutions are IP-based, our 5G four live solutions are IP-based, and our AI solutions are IP-based, so as everything converges on internet protocol, we’ll be able to automate and digitize, and that’s really where the magic of what we bring in terms of the software that’s delivered over our hardware solutions brings opportunity for our customers to do so much more, so much more efficiently, so it’s either about creating amazing content but doing it at a lower price point so that efficiencies in the system are there, creating automation to be able to identify what the ideal highlights are. There’s so many ways that AI is going to impact our industry both on the public safety side as well as on the sports and entertainment side, live production side, and we’re going to be at the forefront of it.

[Mickey Miller:]

So I think that’s all the questions we have. Again, we will be connecting with our investor base more consistently now with Matt Glover and Tom Colton from Gateway Group leading us on the IR side. If you have any questions, please shoot it to our VISL at gatewayir.com, and we’ll continue to focus on the basics of taking this opportunity, the funnel that we have, increasing that funnel as well as converting that funnel to orders and targeting our software services business and our growth engine around public safety and sports and entertainment. Thanks everyone.

[Mike Bond:]

Thank you.

[Operator:]

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