Boxlight(BOXL) - 2023 Q2 - Quarterly Report

PART I. Financial Information Unaudited Condensed Consolidated Financial Statements This section presents Boxlight Corporation's unaudited consolidated financial statements, highlighting a net loss improvement and key accounting changes - Effective January 1, 2023, the Company changed its segment reporting to align with geographic markets: Americas, EMEA, and Rest of World. Prior period amounts have been restated for comparability[10][105] - On June 14, 2023, the company executed a 1-for-8 reverse stock split of its Class A common stock. All share and per-share amounts have been retrospectively adjusted[137] Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Revenues decreased to $88.2 million, but gross profit improved to $33.0 million, resulting in a reduced net loss of $3.7 million Consolidated Statements of Operations (Six Months Ended June 30) | Metric (in thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Revenues, net | $88,242 | $110,231 | | Cost of revenues | $55,266 | $80,781 | | Gross profit | $32,976 | $29,450 | | Total operating expense | $31,080 | $32,023 | | Income (loss) from operations | $1,896 | $(2,573) | | Net loss | $(3,735) | $(4,829) | | Net loss per common share | $(0.47) | $(0.67) | Consolidated Statements of Operations (Three Months Ended June 30) | Metric (in thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Revenues, net | $47,052 | $59,628 | | Cost of revenues | $29,224 | $42,794 | | Gross profit | $17,828 | $16,834 | | Net income (loss) | $(811) | $26 | Unaudited Condensed Consolidated Balance Sheets Total assets decreased to $182.3 million due to lower inventories, while total liabilities also decreased to $102.9 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $101,046 | $111,244 | | Cash and cash equivalents | $15,588 | $14,591 | | Inventories | $37,809 | $58,211 | | Total Assets | $182,313 | $195,395 | | Total Current Liabilities | $36,252 | $48,475 | | Total Liabilities | $102,912 | $114,993 | | Total Stockholders' Equity | $50,892 | $51,893 | Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity Total stockholders' equity slightly decreased to $50.9 million, influenced by net loss, dividends, and positive currency adjustments - For the six months ended June 30, 2023, the net loss was $3.7 million, and fixed dividends on Series B Preferred stock were $635 thousand[5] - Positive impacts on equity included $1.2 million from stock compensation and a $2.3 million positive foreign currency translation adjustment[5] Unaudited Condensed Consolidated Statements of Cash Flows Operating cash flow significantly improved to $10 thousand provided, primarily due to inventory changes, ending with $15.6 million cash Cash Flow Summary (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $10 | $(6,876) | | Net cash used in investing activities | $(100) | $(659) | | Net cash provided by financing activities | $1,000 | $621 | | Net increase (decrease) in cash | $997 | $(6,318) | | Cash and cash equivalents, end of period | $15,588 | $11,620 | - The improvement in operating cash flow was largely driven by a $20.1 million positive change from inventories, compared to a $2.0 million use of cash in the prior year[133] Notes to Unaudited Condensed Consolidated Financial Statements Notes detail accounting policies, segment reporting, CECL adoption, debt agreements, and goodwill impairment risk for the Americas unit - The company adopted the new CECL standard for credit losses on January 1, 2023, resulting in a $76 thousand cumulative-effect adjustment to reduce retained earnings[18] - An interim goodwill impairment test was performed as of June 30, 2023. While no impairment was recorded, the Americas reporting unit, with $22.5 million of goodwill, was determined to be at risk of failing the test in the future[40][86] - The company is required to use commercially reasonable efforts to refinance its Credit Agreement with Whitehawk and repay the facility by September 30, 2023[44] - As of June 30, 2023, the company had open inventory purchase commitments totaling $30.6 million[180] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses decreased revenues but improved gross profit and margin, alongside liquidity challenges and goodwill impairment risk Financial Performance (Six Months Ended June 30) | Metric (in millions) | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Revenues | $88.2 | $110.2 | -19.9% | | Gross Profit | $33.0 | $29.5 | +12.0% | | Gross Margin | 37.4% | 26.7% | +10.7 pts | - The increase in gross profit and margin was primarily attributed to lower manufacturing and shipping costs compared to the prior year[81] - The company's acquisition strategy focuses on integrating acquired companies to achieve cost savings through staff reductions, economies of scale, and improved market reach[38][59] - The company's Americas reporting unit, with an estimated fair value approximately 4% above its carrying value, is at risk of goodwill impairment if future performance does not meet projections[86] Adjusted EBITDA Reconciliation (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net Loss | $(3,735) | $(4,829) | | EBITDA | $6,367 | $4,446 | | Adjusted EBITDA | $8,724 | $6,446 | Quantitative and Qualitative Disclosure About Market Risk The company is exempt from providing this disclosure as it qualifies as a 'smaller reporting company' - The company is not required to provide this disclosure as it qualifies as a 'smaller reporting company'[86] Controls and Procedures Disclosure controls and procedures were deemed ineffective due to material weaknesses, though financial statements are fairly presented - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were not effective as of the evaluation date due to previously identified material weaknesses[71] - No changes were made in the internal controls over financial reporting during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[72] PART II. Other Information Legal Proceedings The company is not currently involved in any material legal proceedings, with no expected material adverse effects - The Company is not currently involved in any material legal proceedings and does not expect pending matters to have a material adverse effect on its financial condition[73] Risk Factors New risk factors highlight unstable market and economic conditions, including bank failures, potentially impacting liquidity and performance - A new risk factor has been added concerning unstable market and economic conditions, including recent volatility and disruptions in the global credit and financial markets (e.g., Silicon Valley Bank closure)[95][89] - These market conditions could impair the company's ability to access financing, increase the cost of capital, and adversely affect its growth strategy and financial performance[89] Unregistered Sale of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported during the period - No information reported[89] Other Information No other information was reported for this item - No information reported[89] Exhibits This section lists filed exhibits, including Credit Agreement amendments and CEO/CFO Sarbanes-Oxley certifications - Filed exhibits include the Third and Fourth Amendments to the Credit Agreement with Whitehawk Finance LLC[90] - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act are included as exhibits[90]