Boxlight Corporation — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023; unaudited. Boxlight designs and sells interactive education technology, software, accessories and services under its Clevertouch and Mimio brands. Amounts below are in U.S. dollars; financial statement figures are in millions unless noted.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | First half 2023 | First half 2022 |
|---|---|---|---|---|
| Revenue | $47.1 | $59.6 | $88.2 | $110.2 |
| Gross profit | $17.8 | $16.8 | $33.0 | $29.5 |
| Gross margin | 37.9% | 28.2% | 37.4% | 26.7% |
| Operating income (loss) | $2.1 | $0.9 | $1.9 | $(2.6) |
| Net income (loss) | $(0.8) | $0.03 | $(3.7) | $(4.8) |
| Net loss attributable to common stockholders | $(1.1) | $(0.3) | $(4.4) | $(5.5) |
| Net loss per common share, basic and diluted | $(0.12) | $(0.04) | $(0.47) | $(0.67) |
- Revenue declined 21.1% in Q2 and 19.9% in the first half, primarily from lower sales volume; management also cited unfavorable foreign exchange effects for the first half.
- Gross profit and margins improved as manufacturing and shipping costs fell. General and administrative expense was nearly flat in Q2 and lower year over year for the first half, mainly due to lower stock compensation.
- Interest expense was $2.8 million in Q2 and $5.2 million in the first half. Total other expense was $2.6 million and $5.3 million, respectively.
- Non-GAAP adjusted EBITDA was $5.4 million in Q2 versus $5.2 million, and $8.7 million in the first half versus $6.4 million. This measure includes specified adjustments and is not a substitute for GAAP results.
- Cash and cash equivalents were $15.6 million at June 30, 2023, up from $14.6 million at year-end. Working capital was $64.8 million; the reported current ratio was 2.79.
- First-half operating cash flow was approximately breakeven ($10,000), compared with cash use of $6.9 million in 2022. Investing used $0.1 million; financing provided $1.0 million. Inventory fell to $37.8 million from $58.2 million at year-end, while accounts receivable rose to $37.6 million from $31.0 million.
- Debt net of discounts and issuance costs totaled $47.2 million, including $3.8 million current and $43.4 million long-term. The Whitehawk facility is high-cost debt; the filing describes its amended rate as SOFR-based, but does not provide a clear current all-in rate.
Material changes and business developments
- Segment reporting changed effective January 1, 2023 to Americas, EMEA and Rest of World. Q2 revenue was $30.1 million in Americas versus $27.7 million a year earlier, and $20.0 million in EMEA versus $31.9 million; Rest of World revenue was $0.3 million versus $0.1 million, before eliminations and adjustments.
- On June 14, 2023, the company effected a 1-for-8 reverse stock split; all share and per-share data were retrospectively adjusted. Shares outstanding were 9,465,494 at June 30 and 9,466,349 on August 8.
- In April 2023, Boxlight drew $3.0 million under a Whitehawk delayed-draw loan, due by September 29, 2023. The company reported repayment of that $3.0 million on July 20, 2023.
- The company adopted the CECL credit-loss standard on January 1, 2023, recording a $76,000 after-tax reduction to retained earnings.
Outlook, risks and unusual items
- No specific revenue or earnings guidance was provided. Management said cash, expected operating cash flows and management of customer and vendor payment terms were expected to support working capital and debt service, while noting financing-market uncertainty.
- A second-quarter waiver under the Whitehawk credit agreement required the company to use commercially reasonable efforts to refinance and repay the facility by September 30, 2023, or as soon as practical. The waiver did not change maturity and imposed a higher prepayment premium upon repayment. Boxlight said it was compliant with covenants at period-end considering waivers and had initiated refinancing plans.
- Series B preferred holders may require cash redemption beginning January 1, 2024, at $10 per share plus accrued dividends; all 1,586,620 shares remained outstanding. Management was evaluating refinancing or restructuring alternatives. Series B dividends were $0.6 million in the first half.
- Goodwill was not impaired at June 30, but the Americas reporting unit’s estimated fair value exceeded carrying value by only approximately 4%. The filing says modest changes in assumptions or weaker customer spending could trigger further testing; up to $22.5 million of Americas goodwill could be written off.
- Disclosure controls and procedures were deemed ineffective due to material weaknesses previously reported in the 2022 Form 10-K. Management nevertheless stated the interim financial statements fairly present the company’s results in all material respects.
- One customer represented 14.6% of first-half revenue. One vendor represented 17.5% of first-half cost of revenues. Open inventory purchase commitments were $30.6 million.
- The filing identifies no legal matter expected to have a material adverse effect and no material change to previously disclosed risk factors other than heightened credit-market and liquidity risks. It also notes an interim goodwill impairment test and a $30.6 million inventory purchase commitment as notable exposures.
Important facts for investors to verify
- Progress, timing and cost of refinancing the Whitehawk facility, including compliance with the waiver and any prepayment premium.
- Ability to fund seasonal working-capital needs, vendor prepayments, debt service and potential Series B cash redemptions.
- Whether revenue and customer spending assumptions supporting the Americas goodwill valuation are achieved, given the small valuation cushion.
- Trends in sales volume, gross margin, receivables and inventory reserves, and the concentration of revenue and supply with key counterparties.
- Remediation of the disclosed material weaknesses in disclosure controls and procedures.