Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record second quarter revenue of $13.1 million, up 43% from the prior year.
- Record second quarter gross profit of $6.8 million, significantly higher than $4.3 million in 2023.
- Annual recurring revenue (ARR) reached an all-time high of approximately $18 million.
- Successful debt refinancing, securing a $22.1 million senior revolving credit facility.
- Strong demand across all business segments, particularly in quick-serve restaurants and sports and entertainment.
Negative Points
- Revenue can be lumpy quarter-to-quarter due to deployment timing.
- Challenges in scaling BCTV installations to the originally planned pace.
- Potential seasonal slowdowns in the fourth quarter due to holiday moratoriums and other factors.
- Continued market constraints, such as access to electrical personnel, affecting deployment schedules.
- Uncertainty in the impact of current interest rates and market conditions on enterprise capital investments.
Q & A Highlights
Q: Assuming it's unchanged, can you remind us your revenue guidance? And then talk about any insights to seasonality or things management knows about timing of deliveries over the next two quarters, so how we could think about maybe you're thinking about the ramp?
A: (Richard Mills, CEO) We believe on a quarter-to-quarter basis, we're going to exceed the prior year by 20% to 40% every quarter. We expect to continue that throughout the year. Q3 is expected to be strong due to consistent activity, while Q4 might see a slowdown due to the holiday season but could be offset by year-end budget spending by some companies.
Q: You had a press release this quarter about entering into Latin America. Maybe talk about if you have any anchor clients that are helping you more seamlessly enter this market, and maybe talk about the market opportunity as well?
A: (Richard Mills, CEO) The market opportunity in Latin America, particularly Mexico, is significant. We are focusing on Mexico to launch LatAm, driven by demand from existing clients. The quickest area of entry is in the C-store environment and QSR, where our technology is superior. Initial responses have been very positive.
Q: It wouldn't be a call if I didn't ask about BCTV. Can you talk about some of the constraints that are easing? And when do you think that pace of installations might hit the original pace that you planned?
A: (Will Logan, CFO) Constraints like access to electrical personnel are easing. We expect the pace of installations to grow in Q3 and Q4 but might not hit the original pace until 2025. There could be a potential slowdown in Q4 due to the holiday season and bowling center activities.
Q: How would you describe enterprise's appetite right now for digital signage and making capital investments? And maybe talk about the business development trends in general?
A: (Richard Mills, CEO) The appetite for digital signage remains strong. We are engaged in meaningful discussions with high-level second and first-tier brands. The strength of our pipeline is significant, with both the quantity and quality of logos increasing. However, larger organizations tend to have longer processes and extensive diligence checks.
Q: You guys have had several new wins with stadiums lately. To what do you attribute that success? And are you seeing any additional monetization opportunities in new stadium wins?
A: (Richard Mills, CEO) We've been in this market for several years and are now dealing with larger tier stadiums. Typically, a stadium win includes about 600 food screens, and we expect these screens to migrate to our SaaS platforms over the next two to five years. Our comprehensive approach and strong relationships with OEM partners are resonating with customers.
Q: Could you talk about the opportunity over the next two to three years, especially in C-stores and with stadiums on the managed media part of your business?
A: (Richard Mills, CEO) The opportunity for retail media networks is enormous as ad dollars shift away from traditional media. Advertisers want to target consumers during procurement activities. While there is a large CapEx upfront expense, we expect significant capital allocation towards building out media networks in 2025-2027. Third-party financing options are also becoming more available.
Q: Could you talk a little bit about how your channel partner program is pumping up the pipeline of your opportunities?
A: (Richard Mills, CEO) Our channel partner program is growing, with partners actively buying licenses. Although the recent passing of our Director of Channel Sales, Dave Petricig, was a setback, we are evaluating the right person or restructure to continue the momentum.
Q: Your hardware gross margin came in at 30%. Are we expecting kind of a slow increase, like are these fluctuations at a higher level moving forward?
A: (Will Logan, CFO) We have taken advantage of opportunities to pre-purchase large quantities of displays, reducing screen purchase prices. While we expect to continue leveraging scale for better margins, we would guide folks to expect hardware margins in the low 20s for now.
Q: Have your goals in terms of leverage by the end of the year changed at all?
A: (Will Logan, CFO) We are still on track with prior net debt targets. The first half of the year is traditionally stronger in cash flow, and we are focused on maintaining incremental capital availability for customer acquisition opportunities or strategic transactions.
Q: You talked about the debt refi in the quarter. Maybe just provide a little bit more color on this and the operational flexibility it gives you going forward?
A: (Will Logan, CFO) The new debt instrument provides $22.1 million of total availability with flexibility to rise over time. This creates tremendous flexibility for evaluating procurement opportunities, customer engagements, and strategic alternatives. It also normalizes our balance sheet by moving debt from short-term to long-term.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
