Boxlight Corporation (BOXL) — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Financial statements are unaudited; amounts below are in U.S. dollars and millions unless stated otherwise.
Business context and reporting period
Boxlight designs, produces, and distributes interactive education technology, including displays, software, accessories, and services under its Clevertouch and Mimio brands. Its December 2021 acquisition of FrontRow added classroom communication and audio-visual products. The business is seasonal, with substantial educational-market shipments typically ahead of the school year.
Key financial metrics
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $68.7 | $61.0 | $179.0 | $141.2 |
| Gross profit / margin | $21.0 / 30.6% | $15.8 / 25.9% | $50.5 / 28.2% | $37.2 / 26.3% |
| Operating income | $6.5 | $3.5 | $3.9 | $3.0 |
| Net income (loss) | $3.1 | $0.7 | $(1.7) | $(6.7) |
| Net income (loss) attributable to common stockholders | $2.8 | $0.4 | $(2.7) | $(7.2) |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $0.5 | $(13.1) |
| Interest expense, net | $2.6 | $0.9 | $7.3 | $2.7 |
- At September 30, cash was $22.0 million; current assets were $131.7 million and current liabilities $69.4 million, yielding reported working capital of $62.3 million and a 1.90 current ratio.
- Debt was $59.2 million before $5.9 million of unamortized discount and issuance costs; balance-sheet current and long-term debt totaled $53.3 million net. Cash was $22.0 million.
- For the nine months, investing cash use was $1.1 million and financing cash provided was $4.4 million. Cash increased $4.0 million to $22.0 million.
- Total comprehensive loss was $13.2 million for the nine months, including $11.4 million of foreign-currency translation losses.
- Management-reported non-GAAP adjusted EBITDA was $9.9 million in Q3 and $16.3 million for the nine months, versus $7.2 million and $14.1 million, respectively, in 2021. The filing cautions that these non-GAAP measures are supplemental, not substitutes for GAAP results.
Material changes versus the prior comparable period
- Q3 revenue rose 12.7%; nine-month revenue rose 26.8%. Management attributed growth to FrontRow and stronger demand. FrontRow contributed $5.6 million in Q3 and $19.0 million in the first nine months; management reported nine-month organic Boxlight revenue growth of 13.3%.
- Gross margin improved to 30.6% in Q3 and 28.2% year to date, from 25.9% and 26.3%. Management cited product mix and FrontRow margins; it also reported that elevated freight costs had begun to decline. Acquisition-related purchase-accounting adjustments affected reported margins.
- Q3 net income rose to $3.1 million from $0.7 million. The nine-month net loss narrowed to $1.7 million from $6.7 million, while interest expense increased substantially with the Whitehawk financing.
- Accounts receivable rose to $51.3 million from $29.6 million at year-end; accounts payable and accrued expenses rose to $48.4 million from $33.6 million. Cash was $22.0 million versus $17.9 million at year-end.
- Class A shares outstanding increased to 74.1 million from 63.8 million at year-end. The July registered offering issued 7.0 million shares and warrants for an additional 7.35 million shares; the filing reported 74,124,212 common shares outstanding on November 7, 2022.
Outlook, commentary, risks, and unusual items
- The filing provides no formal revenue or earnings guidance. Management said it expected to manage financing-market challenges through management of customer and vendor payment terms, while noting tighter and more costly debt and equity markets.
- Whitehawk debt carries high interest costs. A delayed $8.5 million principal payment was extended to February 28, 2023, and the lender amended the facility and waived or extended certain defaults and requirements. The company reported a $2.5 million delayed-draw borrowing in June. On November 4, 2022, after quarter-end, it paid Whitehawk $4.25 million toward the $8.5 million amount due; no prepayment premium applied to that payment.
- Supply-chain and component shortages, shipping delays and costs, the Russia-Ukraine conflict, continuing COVID-19 effects, and foreign-exchange movements could affect deliveries, margins, and results. The company also cited limited vendor credit and advance-payment requirements for most inventory purchases.
- Open vendor inventory purchase orders totaled $33.8 million. One customer represented 14.1% of nine-month revenue; two vendors accounted for 44.0% and 20.0% of nine-month cost of revenues, respectively.
- Management concluded disclosure controls and procedures were not effective at quarter-end because of material weaknesses described in the 2021 Form 10-K. Management nevertheless stated that the financial statements fairly presented the company’s financial condition and results in all material respects.
- Potentially dilutive securities include warrants, options, restricted stock units, and convertible preferred stock. Series B preferred stock carries an 8% annual dividend; fixed dividends paid in the first nine months were $0.95 million.
Important facts for investors to verify
- Whitehawk facility compliance, interest terms, payment schedule, and remaining liquidity after the November 4 payment.
- Cash conversion and collectability of receivables, given the year-over-year balance increase and customer concentration.
- Whether freight-cost relief and reported margin gains persist, and the contribution from FrontRow versus organic growth.
- Potential dilution from outstanding warrants, options, restricted stock units, and preferred-share conversion or redemption terms.
- Progress addressing the disclosed material weaknesses in disclosure controls and procedures.
- Exposure to supply-chain disruptions, vendor concentration, foreign-currency translation, and the $33.8 million of purchase commitments.