Q1 2024 Vislink Technologies Inc Earnings Call

Participants

Carleton Miller; President, Chief Executive Officer, Director; Vislink Technologies Inc

Michael Bond; Chief Financial Officer, Treasurer; Vislink Technologies Inc

Brian Kingstlinger; Analyst; AGP / Alliance Global Partners Corp

Presentation

Operator

Gooding morning. Welcome to Vislink first quarter 2024 earnings conference call. My name is Marlis, and I will be your operator for today's call. Joining us today for today's presentation are the company's CEO, Mickey Miller, and CFO, Mike Bond, who will report results for the first quarter ended March 31, 2024. A copy of the press release is available on the company's website.
Before we begin the call, I would like to provide this link Safe Harbor statement, which includes cautions regarding forward-looking statements made during this call. Management will make statements during the call that include forward-looking statements within the meaning of the federal securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.
Statements contained in this call that are not statements of historical fact should be deemed to be forward-looking statements. All forward-looking statements, including, without limitation, our examination of operating trends and financial expectations are based upon the company's current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements.
Accordingly, you should not rely on this statement for a list of the risks and uncertainties associated with the Company's business please see the Company's filings with the Securities and Exchange Commission. This link disclaims any intention, our obligation, except as required by law to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise conference call contains time-sensitive information that accurate only as of the live broadcast this morning May 15, 2024.
And now I would like to turn the call over to Vislink's CEO, Mr. Mickey Miller. Sir, please go ahead.

Carleton Miller

Thank you, operator, and thank you, everyone, for joining us today. this morning. We filed our 10-K with the SEC and issued a press release that provided our financial results for the first quarter ended March 31, 2024, along with key business accomplishments.
As a brief overview for today's call, I'll start by discussing our first quarter performance and highlighting our progress towards our three-year financial goals and then pass the call to Mike to discuss our financial results. Afterward, I'll come back to discuss recent updates within our key target markets, type developments and updates on our go-to-market strategies.
With that, let me begin by expressing our enthusiasm about the strides we've made and our optimism for visits first quarter of 2024 has further solidified Vislink's foundation, demonstrating substantial financial and operational gains directly resulting from the strategic initiatives that we implemented two years ago to increase operating leverage. In Q1, we achieved a 20% year over year revenue increase, reaching $8.6 million. This growth was primarily driven by robust sales of Milgard customers fueled by the adoption of our AirLink platform and opportunities opened by the BMS asset acquisition.
These factors combined with increased governmental investment. Given the current geopolitical landscape have reinforced our market presence. Our continuous focus on innovation has led to recent product rollouts like click and lively. These links newer products are strategically designed to serve the military, government, sports and media sectors. Both click and Livelink have been met with strong early interest, and we expect that these higher margin products will enhance both our top and bottom-line financial results as sales ramp up.
We are demonstrating continued progress in developing link matrix to fit the needs and preferences of customers in our target markets. Our efforts to promote services and integrate our linked matrix software and our hardware offerings are proving successful as demonstrated by services and software revenue grown to represent 16% of total revenue in the first quarter, up from 13% in 2023.
Additionally, our air to anywhere AVDS platform and the introduction of Dragonfly five are poised to drive further growth. We are intensifying our sales and marketing initiatives, which are showing traction as evidenced by our newer products, becoming an increasing part of our total revenue and we anticipate that the products we introduced over the last few years will approach nearly 70% of total revenue this year.
This strategy not only enhances our value proposition across various use cases. It also unlocks higher margin revenue channels through our device management ecosystem linked matrix.
Looking ahead, we are optimistic about our trajectory as we are working with our largest weighted sales pipeline since the pandemic valued at $48 million entering the second quarter. Additionally, we are actively engaging in opportunities to leverage our existing solutions to expand our involvement in new markets such as drone command and control or drone sea two, we are invigorated by the momentum we've built and are continuing to ramp up our sales and marketing efforts to support our recent product launches.
As we proceed, we are on track to achieve cash flow neutrality by the end of 2024 and our aim to be cash flow positive by 2025. We are continuously evolving our operations, but we are proactively identifying areas for operational enhancements and cost saving measures. These ongoing efforts are crucial as we work to drive further revenue growth and enhanced profitability.
Before I go further, I'll pass the call over to our CFO, Mike Bond, to provide a detailed overview of financial results for the first quarter. Mike?

Michael Bond

Thank you, Mickey, and good morning, everyone. Looking in our financial results for the first quarter, our total revenue increased to $8.6 million, up from $7.2 million in the prior year period and a sequential increase from $8.1 million in Q4 2023. The increase in revenue was primarily driven by a jump in sales to military and government markets. Gross profit increased to $4.8 million, up from $3.7 million in the prior year period.
Gross profit margin for the quarter was 59%, up from 54% in the prior year period year over year. Improvement in gross margin reflects greater operating efficiency and a higher mix of software and services revenue. Total expenses were $10.2 million compared to $9.5 million in the prior year period. This change is due to our increased focus on sales and marketing as we push to expand our reach and support our new product line.
Turning now to our profitability measures. Operating loss improved to $1.6 million down from a loss of $2.3 million in the prior year period. This improvement is a direct result of our increased revenue and higher margins, demonstrating the effectiveness of our strategic focus on more profitable product categories.
Net loss attributable to common shareholders improved to $1 million or $0.39 per share from a loss of $1.8 million or $0.8 per share in the prior year period. This improvement underscores our strategic cost management and ongoing efforts to enhance our operational efficiency.
Moving now to our balance sheet as of March 31, 2024, our cash and short-term investments stood at $13.8 million compared to $14.2 million at December 31, 2023 improving cash performance remains a top priority for us, and we have shown clear improvements in cash usage in Q1. We maintained a robust working capital of $31.2 million at the end of the first quarter compared to $31.8 million at December 31, 2023.
We expect to see continued improvements in our working capital turns in the coming quarters. Our strong balance sheet supports our operational flexibility, enabling us to actively pursue strategic acquisitions and partnerships, especially in the defense and public safety sectors. These moves aimed to expand our capabilities and market reach within the Milgard market.
In summary, our efforts over the past two years to restructure our cost base, redesign our product lines, integrate two key acquisitions and rejuvenate our sales channels have begun to bear fruit, making a significant improvement in our profitability results as we progress into 2024. These initiatives are expected to further solidify our positive growth trajectory.
This concludes my prepared remarks. I'll now turn it back to Mickey.

Carleton Miller

Thank you, Mike. Returning to operational updates in our Milgard markets, we continue to show impressive growth driven largely by the sales momentum of our early platform solutions. This growth is further propelled by the successful integration of the BMS assets. This quarter our focus on developing long-term relationships with OEMs is helping to build more predictable revenue streams for the future.
Notably, we successfully achieved approved supplier status with three new OEM partners in addition to our AirLink platform, our AnyWare offering and Livelink introduction are driving new revenue with Milgard customers. These included a prominent European police department, deploying live link to bring live video from the field to help drive more proactive decisions and allocate resources more efficiently.
In the live production markets, we maintained a solid performance with revenue contributions consistent with the prior year period. This stability reflects the continued demand for our products with events like the Olympics on the horizon, we expect this trend to continue. Our involvement in significant industry events like the A2RL race series, which attracted 30,000 fans underscores the potential for future enhancements and broader applications in VR and AR experiences.
Turning to product updates, we anticipate that our new products will contribute almost all of our sales in 2026. A key driver of this growth is our ABTS air to AnyWare platform. This platform will significantly accelerate our software and service sales in the coming years by incorporating advanced analytics capabilities that augment our existing Visual Solutions. This strategic focus is not just about increasing sales volumes. It's about enriching the quality and functionality of our solutions, ensuring that our technology anticipates market demands.
The introduction of Dragonfly five and NAB 2024 represents a key strategic advancement in our product line as the Vislink smallest ever transmitter, specifically designed for dynamic environments where mobility and compact size are critical. Dragonfly five excels in live video capture from POV cameras UAVs and body-worn devices, delivering high quality, real-time video transmission in a miniature package.
Moving forward, our strategy is to harness this technology to enhance sports and media broadcast experiences and integrate into broader applications such as emergency response surveillance and more in line with our strategic expansion, we are enhancing our solutions to AI video processing. This advancement aims to improve the detection and analysis of activities such as crowd control, drug trafficking and border surveillance.
Additionally, in 2023, we secured cloud distribution and storage of footage for our ABDS services, ensuring data accessibility and protection. We continue to prioritize the protection of our customers' data. We're also improving our systems remote management capabilities, including integrated eSIM provisioning services. These developments leverage our common circuit architecture and component base to enhance system scalability and quality while reducing costs, simplifying the management of our technologies and boosting their efficiency and effectiveness in our operations.
As for our go-to market strategies. We continue to see growth potential across our four focus areas live video, connectivity, video data, transport, ABTS and drone control and communications. In Q1, our efforts have gained considerable traction with new product introductions, driving increased market interest and trial usage. We are heavily focused on demonstrations and trials in Q2 can to convert this interest into firm orders.
We gain revenue traction in live connectivity and video data transport. Our bonded cellular technology plays a key role in a growing market where connected cameras from various venues and vehicles are essential. We are advancing discussions with key OEM participants to understand their future requirements and align with this links technology roadmap, ensuring that our innovations to meet the evolving needs of our markets.
As I mentioned, we are seeing traction in drone C. two. While this is an emerging market, we expect it to be fast growing in the years ahead. We are having meaningful conversations with key industry leaders and the feedback from the market and our OEM partners has been overwhelmingly positive, confirming the strong demand and expanding the reach of our technology suite.
As we move forward in 2024, our strategy is finely tuned to support the recent advancements and launches in our product lines. The significant role of our ABTS anywhere platform growth accelerate the growth of our software and service-based revenue streams. This transition aims to improve the functionality and quality of our Visual Solutions and align with our goal to increase sales volumes across targeted markets. We remain focused on extending our reach and influence in the milk of markets.
Our strategic efforts are bolstered by a strong sales pipeline. The largest post pandemic backlog, leisure experience and continuous improvements in operational efficiency. These elements are key as we work to achieve cash flow neutrality by the end of 2024 and aim for positive cash flow in 2025.
Looking ahead, we are energized by the positive start to the year are dedicated to maintaining this momentum with our solid foundation from Q1 and the ongoing strategic initiatives are poised to drive us toward meeting our ambitious targets for this year and beyond.
As we progress, we are consistently refining our business model and are confident we will continue to reduce our cost base with a clear focus on operational excellence and market expansion, we are well positioned to capitalize on the opportunities ahead and continue driving innovation and value for our stakeholders. Operator, please provide the appropriate instructions.

Question and Answer Session

Operator

(Operator Instructions) Brian Kinstlinger, Alliance Global Partners.

Brian Kingstlinger

Good morning. Nice results. I have a lot of questions. The first a financial-related question. You look at the makeup of your pipeline and backlog. Do you think the gross margin is sustainable or I guess depending on the mix of products and customer set, what is the range of gross margin investors should come to expect over the next year, year-and-a-half?

Carleton Miller

Brian, Good morning. Out of I'll hit on that and then turn it over to Mike for the numbers. But I think when we look at our pipeline, there's two key themes. One are the tailwinds that we see one is and the insatiable demand for live events. I think in the US, 93 of the top 100 rated shows were live sporting or entertainment events. So that's strong.
But then the no-go piece is an area given the political landscape, geopolitical landscape that we all live in the need for safety and security. So we see a large driver there. So as we see more opportunities in that area, that typically is a little bit higher margin area for us. So Mike, maybe you can give some color to that.

Michael Bond

Brian, as we kind of move forward, we're seeing a higher mix of our newer products, as Mickey mentioned, and as we kind of exit some of the older products. We're seeing some pretty drastic increases in our margin. So it whereas the old days, some of our older things head, we are a high 40s low 50s margin. Now we're seeing more in the upper 50s to low 60s. So as we can continue to put more of the more of the new products into the mix we're going to start seeing high 50s, low 60s margins.

Brian Kingstlinger

Great. That's super helpful. And then can you talk about the upgrade cycle for the DMS customer base, which I think you talked about last quarter has some older technology. Can you size the opportunity just looking at customer sites?

Carleton Miller

Yes. When we look at that the customer base, given the challenges of the Amazon was going through. They were in a position to help those customers that upgrade. So what we've done with a lot of the customers is work with them on a transition period. Many of these are designed into platforms.
So we are working with the customers to make sure they have the BMS product line to support their needs in the 12 to 18 month period and then work with them on a transition to a newer product, which will be higher compression, higher throughputs, better video quality and therefore, they're able to maintain their needs now and then migrate to newer technology along their product lifecycle.
So in the context of that opportunity for us, it's basically that customer base, which was pre-COVID, we've mentioned, was in the $20 million range, every single one of those customers, and we'll be needing upgrades at some point in time.

Brian Kingstlinger

Great. And you've highlighted three new products. Obviously, you announced the Dragonfly in a press release recently. Can you quantify the addressable market these for the initial target customers? Are they in your existing customers? Are they a brand new customer? And then lastly, I know it's a three-part question. How do we think about average unit selling price? Or are they recurring pieces? Maybe take us through the model there?

Carleton Miller

Yes. So in terms of the that the new products and that would include click, live link and Dragonfly five. Those have been all introductions that we've had in the last nine months. Those are for both existing customers and new customers. So from an existing customer base, what that basically is that it gives our customers the options to have either proprietary custom solution over a public or private 5G solution all connected through link matrix.
So we the way we look at those products are basically a Trojan horse to drive software and services recurring sales. So that number one exists with our current customers, but it opens up a lot of new markets and opportunities for its effect on the live link.
Our first opportunity that we delivered on or around bringing live video from belts, attach live links to the cloud for a large police group in Europe. And so it now opens up that type of market for us with a very sleek, slim, high density of package size that allows it to be very mobile. Similarly, with slick and Livelink, we'll see the same type of thing.
So it not only supports our existing customers, but also broadens the opportunity for our overall plan to drive more software service sales through our UEY.'s.

Brian Kingstlinger

Is there a way to think about either average selling price, total contract value for some of these products? Are they relatively small of a relatively large? How do I think about that?

Carleton Miller

Yes, I think the best way to think about it. Typically, our order size will include one or multiple types of those price as they meet the different demands for their use case. So in the case of a live broadcast. They may have a lively they may have gotten quicker than they may have on a our Dragonfly or several sets is highly dependent upon what the use cases and what they're trying to achieve.
And then in on public safety, typically you see some uniformity around what they want to deploy because they're basically integrating into their current workflows and operations. So we're trying to standardize around a certain package size.

Brian Kingstlinger

And then you talked about increasing investment in sales and marketing that people that advertising maybe break down what those investments are?

Carleton Miller

Yes, that's the number one is people we've added we've had additional sales capability. We are kicking off a arm and SEO effort, which will be incremental and will go at that slow, but largely it's people. And we've integrated the overall sales force instance, that BMS has had into the overall Salesforce instance of vigilant. And so that increase as well.

Brian Kingstlinger

Great. Last question I've got is you mentioned three OEMs. I think if I heard you right, approved you as a supplier, are you able to identify who those OEMs are?

Carleton Miller

We have, but we've got it. I can say that two of them are man aircraft and the others are and one is unmanned. And I think that's the area that we see a huge potential for us and his direct drone command and control. It's an emerging market for us. We see tremendous potential there globally, and it's really taking the technologies that we have around beamforming bonding, channel bonding and resilient radios, software defined radios that allow us to address that particular need in a very efficient way.
So we're really excited about that. It's still early in that market. We do have revenues in that market currently today, but we think that could be a really huge upside for us in the future.

Brian Kingstlinger

Great. Thank you so much.

Carleton Miller

Thanks, Brain.

Michael Bond

Thanks, Brain.

Operator

And this concludes our question-and-answer session. I'd like to turn the call back over to Mickey for some closing remarks. Please go ahead.

Carleton Miller

Thank you for joining us today, everyone. This quarter marks a significant stride forward in our journey, a testament to the hard work of our team and the strong support from our investors. Our mission to revolutionize video capture and delivery and advance new golf markets through innovative technology continues to drive our strategic direction as we reflect on a successful start to the year.
We are energized by the opportunities that lie ahead with a solid financial foundation and a clear strategic direction. We are confident that we can maintain this momentum and reach new heights. Thank you for your continued trust and support. Operator?

Operator

Thank you very much for joining us today for this Lynx First Quarter 2024 conference call. You may now disconnect and have a great day.