Boxlight Corporation — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 16, 2023. This is an annual report, not a standalone Q4 report. Boxlight develops and sells interactive display, classroom audio and communications, STEM, software, and training products, primarily to education customers. Approximately 80% of FY2022 revenue came from interactive displays; 46% came from outside the United States.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $221.8 million | $185.2 million |
| Gross profit / margin | $64.9 million / 29.2% | $46.5 million / 25.1% |
| Operating income (loss) | $3.0 million | $(2.6) million |
| Net loss | $(3.7) million | $(13.8) million |
| Net loss attributable to common stockholders | $(5.0) million | $(14.7) million |
| Adjusted EBITDA (non-GAAP) | $18.9 million | $12.1 million |
| Cash from operating activities | $1.2 million | $(2.3) million |
- Revenue increased 19.8%; excluding FrontRow, acquired on December 31, 2021, management reported growth of 5.9%.
- Gross margin expanded as manufacturing and freight costs declined from the prior year and FrontRow products carried higher margins. FrontRow contributed $24.8 million of revenue and $0.8 million of net income in 2022.
- Interest expense rose to $9.9 million from $3.4 million. The reported net loss improved partly because of lower losses on liability settlements and a $2.6 million favorable change in derivative warrant fair value.
- Cash and cash equivalents were $14.6 million at year-end, down from $17.9 million. Working capital was $62.8 million and the current ratio was 2.29. Operating cash flow turned positive, but inventory rose to $58.2 million from $51.6 million.
- Year-end debt was $50.0 million before unamortized discounts and issuance costs, or $44.6 million net; $0.8 million was classified as current and $43.8 million as long-term. Scheduled principal payments include $44.7 million in 2025. Cash interest paid in 2022 was $8.3 million.
Material changes and financing
- Revenue, gross profit, and operating results improved year over year; operating cash flow also improved. The comparison includes FrontRow for all of 2022 but not for 2021 results, as it was acquired on the last day of that year.
- Boxlight’s WhiteHawk term loan originated at $58.5 million, with a potential delayed-draw facility. Amendments extended the $8.5 million repayment date, addressed borrowing-base issues, and provided for a $2.5 million additional draw. The company says it repaid the $8.5 million during 2022 and was compliant with covenants and borrowing-base requirements at year-end.
- The loan carries a high variable interest margin; the June 2022 amendment specified margins of 13.25% for LIBOR-rate loans and 12.25% for reference-rate loans. The agreement also includes prepayment premiums and requires a financial advisor.
- A July 2022 registered offering generated $5.0 million gross and approximately $4.6 million net proceeds. It included 7.0 million common shares and warrants to purchase approximately 7.35 million shares at $0.68 per share. Class A shares outstanding increased to 74.7 million at year-end from 63.8 million.
- Series B preferred stock carries an 8% annual dividend; fixed dividends were $1.3 million in 2022. Holders may begin requiring cash redemption in 2024, and Series C redemption rights begin in 2026, subject to the terms disclosed in the filing.
Outlook, risks, and unusual items
- Management said it expected the positive business trend to continue through 2023, citing anticipated demand in education, government, and corporate markets. The filing provides no quantified revenue, earnings, or cash-flow guidance.
- Liquidity depends in part on working-capital management: school purchasing is seasonal, inventory is built ahead of the school year, vendors provide limited credit, and inventory purchases may require prepayment. Open inventory purchase orders were $56.2 million at year-end.
- Key business risks include dependence on interactive displays and education spending, intense competition and pricing pressure, supplier and shipping disruptions, foreign-exchange exposure, customer and reseller concentration, and the ability to expand beyond education. One supplier accounted for 56% of FY2022 cost of revenue.
- Financing and market risks include high interest costs, debt repayment obligations, possible dilution, and Nasdaq’s minimum-bid-price requirement. The stock remained below $1; Nasdaq granted an additional compliance period through July 3, 2023. A February 2023 authorization permits repurchases of up to $15 million but does not require the company to buy shares.
- Management concluded disclosure controls and internal control over financial reporting were ineffective at December 31, 2022 because of material weaknesses involving accounting policies, close and reporting oversight, and independent review and documentation of transactions. Management reported additional post-close procedures; the auditor gave an unqualified opinion on the financial statements but did not express an opinion on internal-control effectiveness.
- No material pending litigation was reported. The auditor identified derivative-warrant valuation and goodwill impairment testing as critical audit matters. The company reported no goodwill impairment for the periods presented.
Important facts for investors to verify
- Current WhiteHawk principal, applicable interest rate, covenant status, and ability to meet the large scheduled 2025 maturity.
- Whether operating cash generation can support seasonal inventory needs, the $56.2 million of open purchase orders, and ongoing debt service.
- Progress in remediating the disclosed material weaknesses and effectiveness of controls in subsequent reporting periods.
- Potential dilution from outstanding warrants, options, restricted stock, and preferred-stock conversion or redemption rights.
- Nasdaq bid-price compliance status and whether any share repurchases are actually made.
- Underlying performance excluding FrontRow and the extent to which margin improvement and adjusted EBITDA reflect sustainable operations rather than acquisition effects, noncash items, or other adjustments.