Boxlight Corporation (BOXL) on Q1 2021 Results - Earnings Call Transcript
Operator: Thank you and welcome to the Boxlight First Quarter 2021 Earnings Conference Call. By now, everyone should have access to the press release issued this afternoon. This call is being webcast and is available for replay. The remarks today will include statements that are considered forward-looking within the meaning of securities law, including forward-looking statements about future results of operations, business strategies and plans, customer relationships, market trends and potential growth opportunities. In addition, management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current knowledge and expectations as of today and are subject to certain risks and uncertainties, and may cause actual results to differ materially from the forward-looking statements.
Michael Pope: Good afternoon, everyone, and thank you for joining our first quarter 2021 earnings call. We completed another record quarter with $48 million in customer orders, $33 million in revenues, 28% gross profit margin as adjusted for acquisition-related purchase accounting and $1.6 million in adjusted EBITDA, again outperforming our guidance for the quarter. We also reported as of March 31, $21 million in back orders, a strong balance sheet with $10 million in cash, $23 million in inventory, $22 million working capital and $47 million in stockholders' equity. Our triple-digit revenue increase over the same quarter last year is a testament to our winning expansion strategy through both organic growth and strategic acquisitions. We continue to benefit from unprecedented market expansion, particularly in the education sector, as schools return to in-class learning and are utilizing increased technology budgets supported by substantial government funding programs. Given our current order volume and growing sales pipeline, we are optimistic on the second quarter and expect to report revenue of $39 million and adjusted EBITDA of more than $1 million, resulting in an expected first half of 2021 with $72 million in revenue and greater than $2.6 million in adjusted EBITDA. And in addition to our remarks today, I invite you to reference our shareholder letter published on April 27, which provides a more detailed accounting of our progress today, as well as insights on our growth strategy. While receiving record order volume, we have experienced some supply chain challenges, including interruptions to inventory production schedules, as a result of component shortages, along with delays in the shipping and receiving of goods. We have also been managing cost increases for both hardware and shipping, which has resulted in reduced gross profit margins.
Mark Starkey: Thank you, Michael. Q1 was certainly a record quarter for us. And I would also like to take this opportunity to thank all of our staff and our customers who have helped contribute to our success during the quarter. As Michael stated earlier, we booked over $47 million of orders from our partners. That represents a 528% growth in order intake year-on-year and is a record for Boxlight. Some of our key orders in the U.S. included $8.7 million from Tierney, $4.2 million from Central Technologies, $2.4 million from our distribution partner D&H, $2.2 million from Trox, $2.2 million of orders from Digital Age Technologies and $2 million from Data Projections. Whilst many of our largest orders were from U.S. partners, it is worth noting that we took over $21 million of orders from partners outside of the U.S., predominantly in EMEA. This highlights the quality and diversity of our customer base, which will be crucial as we develop and expand our business over the next few years. On the 26th of April, 2 of our largest partners, Tierney and Trox merged to become one organization. This is a very significant opportunity for Boxlight, because Tierney County has exclusive rights to sell Clevertouch in 49 of the 50 states in the U.S. We are discussing the extension of our Clevertouch exclusivity contract to include Trox across 49 States and Canada. This means that once an agreement is reached, the number of salespeople who are actively selling Clevertouch in the U.S. will increase substantially from about 40 heads to over 200 heads. We expect the agreement to be finalized in the next few weeks. This automatically gives Clevertouch true sales presence across the U.S. and Canada. In terms of end users, we had another quarter of fantastic wins across the globe. One notable win was the Ministry of Defence in the UK. The MoD purchased more than $1.4 million of Clevertouch screens to use throughout their bases in the UK. They selected our screens for 2 main reasons: firstly, the ability to totally lock down our screens and use them in a very secure environment; and secondly, because of the flexibility of the link software, allowing the emoji to get the maximum benefits from the Clevertouch screens. The Americas region for Boxlight had several key wins in Q1 of 2021. Brighton school districts in Michigan purchased more than $1.1 million in Boxlight product, including 338 6-inch panels, and our MimioClarity audio system for each classroom. Our key reseller in Tennessee, Central Technologies continues to do well throughout the state, purchasing more than $2.6 million in Boxlight products in Q1, including a major win Warren County.
Patrick Foley: Thanks, Mark, and good afternoon, everyone. The further expand on what you've already heard from Michael and Mark, I would like to add a few figures to provide some context to Boxlight's international operations. So revenue by country and region, total revenue in Q1 was $33.4 million, of which EMEA was 54% or $18.1 million, of which the UK represented 56%, the U.S. was 42% or $13.9 million, the rest of the world 4%, $1.4 million, which was mainly Australia and South Africa. In terms of customers, the top 10 customers' represents approximately 47% of total sales in Q1 with the single largest customer of 8%. And these are based across a number of markets, namely U.S., UK, Denmark and France. Nearly two-thirds of total sales are covered by the top 20 customers approximately 64%. This is pretty similar to our Q4 2020. For our sales product mix and gross margin in Q1 displays remains the largest proportion of total revenues at 78%. These are largely sales of interactive flat panel displays, with related accessories generating a further 9% and the balance coming from software, services and STEM solutions. Adjusted gross margin for the quarter was 25.6%. The IFPD margin was approximately 26% which would have been slightly higher. However, as reported by Michael earlier increased global shipping costs where we are seeing a ForEx normal rate can reduce margin by up to 4 percentage points. We anticipate that higher costs will remain for the next 2 quarters. Screen sizes and their splits in Q1 2021 within the education sector 77% of all interactive displays with 75-inch and 86-inch panels, which follows the trends we are seeing with larger screen formats.
Operator: We will pause for a moment to allow questions to queue. And it looks like we have a question from Brian Kinstlinger. Your line is open. Please go ahead.
Unidentified Analyst: Hi, everyone. Thanks for taking my question. This is Jacob on for Brian. Clearly your North American operations are benefiting from the federal funds. Can you talk about your international positioning? And what are the growth rates like and how much faster do you think you can grow?
Michael Pope: Yeah, so, thanks for the question. This is Michael. I'll say a couple things and then, Pat or Mark, feel free to jump in. So when we look at the globe, the U.S. is absolutely our number one growth market. We're seeing more spending happen in the U.S. than we are in other countries. And so, we have a tremendous focus on the U.S. But there are other countries around the world, including throughout Europe that are also seeing high growth. Germany would be one that we talk a lot about. Other areas may be a little bit more static. But in general, when you look at the globe as a whole minus China, which is the way that we look at the opportunity, we're seeing double-digit growth. And that's true in the U.S. And that's true in other countries in aggregate around the world. And so, there's absolutely opportunity all over. Now, as far as federal funding, there's substantially more federal funding in the U.S. that's been applied. But there are other programs internationally as well, where we're seeing federal funds as well available for school systems in other countries. But again, I would say absolutely U.S. is number one market, beyond that it will be Germany and then certain other territories throughout Europe, and then other territories around the world.
Mark Starkey: Yeah, I mean, just to put a bit more color on that, in Q1, we had in Germany specifically we had 73%. year-on-year growth in revenue. Okay, so significant growth rates.
Unidentified Analyst: Given the timing of some of the federal funding package in the U.S. and talked about maybe in some other countries around the world, one being recent, do you expect the seasonality to be more pronounced this year, meaning in the second half of the year, might be more - might account for a significantly higher percentage of annual revenue?
Michael Pope: That's a good question. I think we're still figuring that out. If the federal funding that's being made available, if that's spent more quickly, then I think absolutely that will be the case. But I think it's yet to be seen how quickly some of these funds will be spent. I will say that we are seeing spending now from the CARES Act money. And you'll remember the CARES Act went in play in March of last year. And we're receiving orders now where schools a year later are spending that CARES Act money. And that CARES Act money that was part of a $2 trillion CARES Act with about $31 billion was allocated to education. You'll remember that in December, there was another COVID relief act that hit. That was about $82 billion for education. And then, in March, the most recent stimulus package, that was $170 billion for education. So we're definitely going to see a lot more money flowing in. I would anticipate the vast majority of that is going to lag into next year. But we do expect to have with seasonality, a stronger second half of the year than first half of the year, that's for certain.
Unidentified Analyst: Okay. And one more and I'll hop back in the queue, if I have any more. Can you talk about the supply chain? Is there any quantifiable impact? I think you mentioned about 4% on gross margin, but any impact that you're seeing on revenue and orders, and then continuing gross margin? And also on building inventory, is there any more color you can give on that and how long you might expect this to last?
Michael Pope: Yeah, so let me tackle the latter part of the question. And then, I'll cover the rest. So as far as timing, it's uncertain. It's a global problem. As we mentioned in our remarks, it's affecting those in our industry, as well as many outside of our industry. Anybody that utilizes chips and components and for technology, and even metals and plastics, we're seeing potential shortages of. So I will say that we're managing the best we can. We're ordering out well in advance. We mentioned in the remarks, we've ordered out through the end of the year. So that's well beyond where we normally would order out. We're seeing lead times of 4 to 6 months. And so, we're planning accordingly. It has not affected us in a major way to this point in time in deliveries. There have been some slippages of deliveries. But generally, we're meeting our delivery timeframes. We believe that's still going to happen in Q2, that we'll meet our timeframe. There is a little more uncertainty around Q3, Q4. But like I said, we're doing everything we can to manage that. As far as impact on orders, we're not seeing impact on orders. We're seeing a tremendous amount of orders. And I think if we're better off than the competition, we'll be putting advantage , because I think we may be receiving some orders that maybe could have gone somewhere else. And then as far as financial impact, you heard the 4%, that's related to shipping costs. We are seeing also additional cost of goods in the cost of our technologies. And that's in the way of increases in prices on components and increases in the bill of materials from our manufacturers. But we're trying to offset that the best we can. In many cases, we've been able to increase prices to our customers. And that helps offset that and negotiate the best we can with the manufacturers. And you can see in Q1 our gross profit, when you adjust for those purchase accounting adjustments, we were 28 points, which we're happy with. That 28% gross profit margin, that's compared to, remember in Q4 we had about a 26.5% comparable gross profit margin. So we're trending in the right direction. We think as some of these concerns around increase in cost, around freight and materials, as those start to normalize, we got to gravitate more towards around that 30 points gross profit margin.
Patrick Foley: Michael, I would just add to that, also the points in terms of supply chain and in terms of what we're doing in terms of pre-planning. So in terms of our working capital, when you look on the balance sheet, you'll see the shift actually moving into our increased inventory, so actually being prepared for that. So we're also, as Michael mentioned, we have kind of like a lead times around 4 to 6 months. So we are actually pre-planning against that, and actually stocking accordingly.
Unidentified Analyst: Great. Thanks so much, guys.
Michael Pope: Yeah. Thank you for the questions.
Operator: We'll take our next question from Jack Vander Aarde. Your line is open. Please go ahead.
Jack Vander Aarde: Okay, great. Hey, Michael. Hey, team, solid results, strong guidance. Couple of questions. I'll start with Michael. So in your recent shareholder letter, you indicated an expectation for at least $40 million of customer orders and you raise your revenue to over at least $31 million of revenue. But clearly, based on today's results, you comfortably exceeded both of those targets, over $47 million of orders and over $33 million in revenue. Could you just maybe speak to some of the drivers that led to that positive delta or upside surprise?
Michael Pope: Yeah, yeah, so a couple things. One, we are seeing increased demand, even beyond our internal targets in the industry. And that's a function of additional focus on technology buying. Some of that is because a lot of classrooms are going back to traditional or hybrid learning. That puts more focus on it. There's also a lot more political focus on technology in the classroom. But then also, there is an immense need for educators and students to have technology to be able to return to learn and bridge learning gap and be effective. So that's part of it, just a general industry. On top of that, you heard us talk about federal funding. That also is driving additional demand, knowing that these federal funds are coming. And those funds are expected to be utilized towards these technologies that we're providing. And then, I would add on top of that, we're a healthier company now than we've been in the past. We had some challenges, if you go back a few quarters. You know, Jack, as you followed us for quite some time. And so just by nature of being a healthier company, I believe there's a lot more confidence from end-users. There is a lot more confidence from our partners. We sell through reseller partners. And so, a lot of those partners now believe in us, and they're standardizing more in our solutions. And then, also we have a steady stream of supply of solutions. So that provides, again, more confidence from the partners. And then it comes down to just the solutions themselves. We have the best solutions in the industry. We're telling that story. We're out there. We're sharing that. We're investing more in our sales team. And all of that is generating results. I would say in general, the uptick in additional orders, the uptick in sales, as a result of those mix - that mix of items. Now, from when we provided guidance to the sales figures coming in higher, now that came down to us reconciling towards end of the quarter, and figuring out what those numbers would be. And we were trying to be conservative when we put the numbers out there. And I was pleasantly surprised that we came in well above our initial numbers we were looking at. So that was just a nice surprise, but we knew that we were in a good place with the guidance of the $31 million in revenue and greater than $40 million in orders.
Mark Starkey: And Mike, I'll just put a bit more color on that, we are winning, wherever we're playing, we're winning, obviously, we were really investing heavily in the sales team. They're being heavily trained, we know, we've got the best products. Okay, we're winning. And, we've got the sail in our wind - or the wind in our sails. And we'll get a lot of good results. So, we're winning a lot of good orders. Yeah.
Jack Vander Aarde: Got it. Fantastic. I appreciate the deep color there. That's helpful. And then just, if I turned to speaking of federal funding opportunities, and there's only a few questions on this or any, but just how many of your districts are being are actively in discussions your channel partners and your district partners? How many of them are you actually working with currently, or have ongoing communications? And, there's an actual real immediate or pending expected opportunity there to access this funding in all of your districts. You're so many school districts and classrooms that you're already penetrated and all across the country. Is this happening universally across all your different territories and districts? Or is it kind of off and on here, or spotty, I should say, and then ramping up to it.
Mark Starkey: Mike, do you want to take that? I mean, simply, it's everywhere, right? It's consistent. It's everywhere.
Michael Pope: That's right. Yeah. So, obviously, in the U.S., every district in the U.S. is getting allocation of funds. So they're talking about it. I would say the majority of those districts have minimal experience in knowing how to access those funds. So they're scrambling to do that. And we provide a lot of resources around that we have a team that helps those districts access funds, and understand how to utilize those funds, we put out a new guide just a couple of weeks ago. And that's a detailed guide of school districts. They can read that guide and understand more about utilization of the funds and accessing the funds. But we're happy also to provide additional resources beyond that. Outside of the U.S. and other countries where there's funds allocated, same thing, everybody knows that the funds are out there and looking to access those funds.
Mark Starkey: Yeah, I mean, just a bit more info. Sorry, Jack, I could just state that the other key things to look at in the U.S. is the penetration rate. So the penetration rate of IFPDs in the U.S. is actually significantly lower than EMEA. Okay. That means the opportunity for us is significantly greater in the U.S. So that's why we are expecting such significant growth rates from the U.S. side of our business.
Jack Vander Aarde: Got it. I'm glad you brought that up, because that's what I was going to follow-up on is just in terms of the overall opportunity. How many - I imagine that, if there's a lot of school districts may they have - they haven't been renovated, or have newer technology implemented yet into their classrooms. I'm expecting that this could be an opportunity for those districts to actually get some federal funding to actually make that happen. Which - does this open the door then to a lot of new customers coming to you now like other districts that didn't already have an interactive technologies already built into their classrooms that you weren't already helping or servicing in any kind of way, but now, because of federal funding, they're coming to you and saying and knocking on your door?
Michael Pope: Yeah. So there's absolutely some of that. And, Jack, I would add 2, there are a lot of districts who are planning on technology refreshes, or new technologies and their districts, but they didn't have the funds allocated. And so now that they have this new funding coming, they're accelerating some of those decisions. But, I think, to Mark's point, couple of thoughts, I think are important. So one is definitely districts that don't have the technologies we sell, it's an opportunity for us to sell, but also there's a large districts that are doing refreshes of technologies they put in play, it could have been 5 or even 10 years ago. And the solutions we're selling with interactive flat panels, various hardware solutions, most of those have about a 5 to 7 year life cycle. And so when you install these solutions, 5 to 7 years later, we're doing a major refresh. And if you look at some of the largest districts where we've been selling like San Diego, we've talked about or Montgomery County or Clayton County in Georgia, Beaufort County, South Carolina, those were actually refreshes of our competitors technologies, right of interactive whiteboards or other interactive flat panels in those districts. And they're replacing that old technology with our newer interactive flat panels, which are 4K high definition with app stores and other technologies that we're including.
Mark Starkey: I mean, just - I mean, on average, every single classroom in the U.S. effectively has $75,000 spend, and it's like, what are they going to spend at home? And technology is pretty much high up there. And we know we've got a lot of potential solutions for those classrooms. So we're well positioned.
Jack Vander Aarde: Got it. That's helpful, guys. And then just another question on just the second quarter guidance, very strong guidance is ahead of my expectations. For a revenue of 30 - was it, $39 million and at least $1 million of adjusted EBITDA, just wondering about that adjusted EBITDA number of at least $1 million, how conservative or how much wiggle room is built into that just given your comments on this supply shortage of components, is that like a risk adjusted for that? And maybe some gross margin hiccups? Just - how much cushion are you baking into there? Because given - you just did over $1.6 million of EBITDA, basically for the first quarter on less revenue? So just trying to figure out if that's a conservative target or not?
Michael Pope: It's a 2 reason for that, Jack. So 1 is you're absolutely right, its risk adjusted for potentially some higher costs around our inventories, we bring it in as well as delivery of those goods. But then also, we've been focused on broadening our sales team and increasing some of our marketing spend. And we've been absolutely focused on taking market share. And that gives us a little buffer as well, for some of the expansion, a little bit of expansion our OpEx, as well. So it's combination of those 2. We say at least right. So there's definitely some room to be much higher than that. And we expect we will be higher than that. But, that $1 million was a conservative estimate to provide.
Jack Vander Aarde: Okay. And then maybe just lastly, in terms of your geographical focus, you've been getting market shares, last quarter, you did mention that you took number one market share in Australia, just maybe an update around - are you making any noticeable material headwinds. It's only been a couple of months, maybe a month or 2 since we last spoke. But what's the next market share that you see yourself, climbing the ladder up the quickest in terms of geographical region?
Mark Starkey: Do you want me to take it, Michael, or do you want to take it?
Michael Pope: Yeah, go ahead, Mark.
Mark Starkey: Yeah, so well, in terms of that data, in terms of that report, the next one comes out about 6 weeks' time. So we'll have that shortly. And then we'll be able to share, where we are in terms of our actual statistics and market share. But in terms of where I see the growth, and where we're effectively going to take market, I think, the U.S.; I think, Germany; I think the UK; we're already very strong, I think we could potentially get second position. I'm looking at the volumes that we're doing the actual quantities that we take, whether we're actually selling in IFPD and it's really quite staggering, the growth that we're doing in the volume. So I think really for us, the key targets are taking market share in the U.S., taking market share in Germany, and then other parts of northern Europe. So that's probably the best guide we can give.
Jack Vander Aarde: That's helpful. And actually, I do have one more question I apologize. On the Samsung arrangement, or partnership, it seems like it's starting to finally kick-in a little bit here. Wondering how your second quarter revenue guidance cause employees contribution from Samsung in any shape or form, is it meaningful? And then also, do you still expect Samsung to really materially ramp into a real revenue contributor, during the back half of this year?
Mark Starkey: Do you want to lead that, Michael, or do you want me to lead?
Michael Pope: Yeah. Well, I'll say just a couple of things. And I'll have you fill in the gap, so the answer is we have not baked in substantial sales at this point into our Q2 of Samsung, because we believe the ramping is going to be in the latter part of the year. And we've only of course guidance for Q2. We do think, it can start to be significant, and we said that in our remarks. A nice movement in the right direction was the announcement we made in our remarks of $1 million in licensing, of selling our MimioConnect and other solutions to Samsung, and their agreement that every interactive flat panel sold in education, every Samsung interactive flat panel sold in education in the U.S. will be accompanied with our MimioConnect software. So that's a movement, the right direction. Now, the recognition of that revenue, we still need to model that, but it's going to be over a period of time, because those MimioConnect licenses are 3-year licenses. And so we'll have to look at how that revenue is recognized. But that was nice move in to bring in that $1 million of orders of that software platform and our training and some other software and content that we're providing. So - but again, I think, come next quarter, we should have a better grasp on where we are with Samsung to be able to provide more updates.
Jack Vander Aarde: Fantastic. Sounds like there's a lot of issues, it's a conservative embedded contribution from Samsung in that guide, a strong second quarter revenue guide. So that's great to hear means there's probably room for upside down the road here as you progress. That's it for me, guys. Thank you.
Michael Pope: Thank you, Jack.
Operator: Our next question comes from . Your line is open. Please go ahead.
Unidentified Analyst: Hi, good afternoon, and congratulations on the really good quarter for Boxlight. Mike, actually just a quick comment, mainly because I work with federal grants, I just really, really appreciate the approach that that you all are taking in terms of setting up kind of an education and assistance center for school districts to take advantage of the federal funding. I know in my line of work, the capacity to apply for that seems to be one of the biggest bottlenecks. And so my first question kind of relates to that, given that, I think you've deployed a really good strategy there, are you seeing kind of an acceleration in kind of requests for help and demand and that type of thing, because I think I've recently heard that only maybe about 3% to 5% of that funding for school districts have already been spent. So it seems like there's just a huge opportunity there.
Michael Pope: Yeah, Chad, that's a good question. So the answer is yes, we're seeing a significant ramp in questions and requests for assistance in accessing funding. Absolutely, the vast majority of the federal funding has not been spent or access even of the CARES Act. Just a few weeks ago, I saw an update to report that showed that maybe as much as maybe half had been spent. So there's still a substantial amount or allocated. So there's still a substantial amount of even that first tranche of CARES Act money is yet to be allocated. So the answer is, yes. We're seeing that ramp, and we feel like us putting out the guide that we produce just a couple of weeks ago, and having internal resources, the timing is right to where we're going to be a resource, as more and more questions ran.
Unidentified Analyst: Great. Great. Well, and kind of tied to that maybe one of the things that caught my ear was the increase that you're going to have in the sales team, I think increasing from around 40 to 200 with at least, I think, here in the States. And I was wondering, if you could just provide maybe a little more color on that, from the standpoint of - are you at the point where you're kind of seeing so much demand that you're going to have? Are you expecting kind of a huge material impact by expanding that sales team in that area? I just wonder if you'd comment on that.
Mark Starkey: Yeah, let me say that first, Mike. So yeah, just to make that clear. So currently, we have - these are external, these are salespeople, our partners who can sell Clevertouch brand. Okay. So at the moment, we only have about 40 salespeople that are partners who are able to sell Clevertouch, because we have a very, very tight control channel, because we have exclusivity with Tierney, because of the merger between Tierney and Trox. Trox have significantly more than 160 sales people. And we are in discussions about that exclusivity agreement and extending that to Trox. Now they've merged with Tierney. And therefore, the amount of external salespeople, our partners who are able to sell Clevertouch will increase significantly from about 40 to 200. So it's not as employing those people, those are sales people already employed by our partners. But the number of people who are now eligible and able to sell Clevertouch will increase by about 5x. So that's the first part of the question. The second part is, is the demand there? Absolutely there is, 100%.
Unidentified Analyst: Yeah…
Michael Pope: And, Chad, I'd add. Just to clarify that, we sell through channel partners, value-added reseller partners. So we don't sell direct in most cases to end-users. And we have over 1,000 of those partners across the globe. We have about 300 of those partners in the U.S., for example, and the majority of the remainder are throughout Europe. But those partners have in aggregate 1,000s of reps. You're hearing about Trox, Tierney, but there's 1,000s of reps out there that support Boxlight and selling our solutions and represent our brand. Internally, we have dozens of salespeople to help support them. But we are selling through these reseller channel partners. Now, of those partners you heard Pat mention in his remarks that the top-20 of those partners make up just over 60% of our total sales. So we do have some very significant partners like the Troxes and Tierneys of the world. But we do have a substantial number of partners beyond that that do order from us and sell our solutions.
Unidentified Analyst: Okay. Great, great, thank you. And my final question is, focuses on, I was wondering if you might comment a little bit on what you're seeing in terms of forward-looking, in terms of the software solutions. You've commented a couple times I think on the MimioConnect licensing and those kinds of things. And my assumption, of course, is that software solutions are going to be probably a higher margin product than, let's say, hardware. And what are you seeing I think in terms of the horizon for kind of the software aspect just beyond the hardware? Thank you.
Michael Pope: Yeah. So, Chad, the way we think of our solutions is we look at different product categories. So it starts with displays. Displays represents, as we've mentioned, over 70% of our total sales. So that's our largest category. But those are the largely interactive flat-panel displays. Then on top of that, we sell accessories. Accessories include mountings and stands for displays, but also our audio solution and document cameras. And we have tablets for the T-shirt. We have student response devices that those all fit into accessories. And then, we sell software, that's a category. We break out STEM. STEM standing for Science, Technology, Engineering, and Math, that includes a robotic solution or 3D printing solution. We have a science device that we sell. And then, lastly, we have a professional services division that provides training and professional development and we charge for that. And we provide that, in some cases district-wide with large contracts, in other cases, we're providing online self-paced or variations in between. So you really have 5 product categories that we look at. Now, today, again, the largest categories, interactive displays, but as we march into the future, part of our aim and vision for the company is to be able to increase those other categories much faster than the rate at which interactive displays are growing, so that our product mix is less heavily weighted toward displays. So I'm giving you a roundabout answer that, yes, absolutely, we think that soft will be a much higher percentage of our total sales, as will be services and accessories and STEM solutions. And all of those are much higher margin. Software is - you asked about software margin, and that's almost entirely margin for us. And up in the gross profit margin, because most of that cost is actually captured down in our operating expenses. Now, internally, we evaluate a little differently. But if you're looking from an external standpoint, the assets can be very, very high margin. But then also, if you look at accessories, most of those are 40%- or 50%-plus percent margin. Our professional services is 40%-plus percent margin. Our STEM solutions largely are as much as 50%-plus margin. And so, again, as a company, we're focusing on improving the product mix, improving our gross profit margins, and software is absolutely a large part of that strategy.
Unidentified Analyst: Thank you. And I actually appreciate the more comprehensive answer to that. Well, that's all the questions I had, and again, congratulations on a great quarter. Thank you.
Michael Pope: Thank you, Chad.
Operator: And it appears that we have no further questions at this time. I will now turn the program back over to Michael Pope.
Michael Pope: Thank you, everyone, for your support and for joining us today on our first quarter 2021 conference call. We look forward to speaking to you again in August when we report our second quarter 2021 results.
Operator: This does conclude today's program. Thank you for your participation. You may disconnect at this time.
