SYTA - Siyata Mobile Inc. (SYTA) Q3 2023 Earnings Call Transcript
2023-11-16 21:52:08 ET
Siyata Mobile Inc. (SYTA)
Q3 2023 Earnings Conference Call
November 16, 2023 08:30 AM ET
Company Participants
Glenn Kennedy - Vice President of International Sales
Marc Seelenfreund - Chief Executive Officer
Conference Call Participants
Jack Vander Aarde - Maxim Group LLC
Brian Lantier - Zacks Small-Cap Research
Presentation
Operator
Good morning, ladies and gentlemen and welcome to the Siyata Mobile Q3 2023 Conference Call. At this time all lines are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Thursday, November 16, 2023.
I would now like to turn the conference over to Glenn Kennedy, Vice President of International Sales. Please go ahead.
Glenn Kennedy
Thank you for joining the Siyata Mobile third quarter 2023 conference call. Today, I'm joined by our CEO, Marc Seelenfreund, and we will be available for questions at the end of the presentation.
During this call, management will make expressed and implied forward-looking statements within the Private Securities Litigation Reform Act of 1995 and other U.S. federal securities laws. These forward-looking statements include, but are not limited to, those statements regarding future product offerings, the belief that we are on the path for strong organic growth, the goal to deliver strong year-over-year revenue growth and reach profitability in the coming quarters and the timing and sale of our rugged handsets to North American and international carriers.
Such forward-looking statements are based on the company's current expectations and assumptions regarding its business, the economy and other future considerations. Because forward-looking statements relate to the future, they are not statements of historical fact and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. The company's actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. The company cannot guarantee future results, levels of activity, performance or achievements.
The forward-looking statements contained in this presentation are subject to other risks and uncertainties, including those discussed in the Risk Factors section and elsewhere in the company's annual report on Form 20-F for the year ended December 31, 2022, filed with the Securities and Exchange Commission.
Now I would like to turn the call over to Marc.
Marc Seelenfreund
Thank you, Glenn. Good morning and thank you for joining the call. For the third quarter of 2023 ended September 30, revenues were $1.8 million compared to $2.6 million in Q3 2022 due mainly to decreased sales of our mission-critical SD7 handset and accessories. This occurred mainly due to moving from non-stock status to stock status with a major U.S. carrier partner at the end of Q3 2023. Adoption of our critical communication devices is expanding both in the U.S. and in international markets in multiple verticals, including public safety, education, health care, security, hospitality and more.
Given our performance throughout the first three quarters of the year and our expanding sales pipeline, we are increasingly optimistic that 2023 will be a strong sales growth year for Siyata, which will carry momentum into 2024. Revenue from the U.S. was 69% of total revenue for the quarter compared to 64% in Q3 2022.
Rugged device sales in Q3 2023 were $1.1 million versus $1.9 million in Q3 2022, a decrease of approximately $800,000 in the quarter due to a decrease in sales of the SD7 handset as we transition from non-stock status to stock status with a major U.S. carrier. This stock position status is a significant achievement for Siyata, which very few device suppliers ever achieved. This means that this carrier will now market and subsidize the SD7 handset to many more customers, which we expect will drive stronger sales.
Gross margin percentage for Q3 2023 was 26.6% versus 33.3% in Q3 2022. Gross margin dollars decreased from $856,000 to $490,000, a $366,000 negative variance, which is a 43% decrease in gross margin dollars. SG&A expenses were $2.7 million in Q3 2023 versus $2.4 million in Q3 2022, an increase of $300,000.
Adjusted EBITDA for Q3 2023 was negative $1.6 million compared to a negative $1.6 million in Q3 2022, which was essentially unchanged. Working capital as of September 30, 2023, was nearly $3.8 million versus just over $1.6 million as of December 31, 2022, a $2.1 million increase in working capital. So far this year, for the 9 months ended September 30, 2023, total revenue was $6.4 million compared to $4.4 million in the same period of 2022, which is a positive variance of just under $2 million or a 45% increase. Gross margin dollars were $1.8 million in 2023 compared to $1.2 million in the same period of 2022, which is a positive variance of just under $600,000, a 47% increase. Finally, the gross margin percentage was 28.2% in 2023 compared to 27.9% in the same period of 2022, a slight improvement.
Turning over to significant business highlights. We are pleased to report that Siyata has delivered on its plan to build and expand its potential customer base for the SD7 handset and accessories portfolio. We previously announced that the SD7 is certified and approved for use with a growing list of North American carrier customers including FirstNet and AT&T, Verizon, T-Mobile, U.S. Cellular and international carrier customers, including Bell Mobility in Canada, TASSTA in Australia and KPN in the Netherlands.
We also previously announced that we have expanded our distribution to include strategic resellers, including Two Way Direct, Goosetown and Tango Tango in the United States, Entropia in Belgium, RadioTrader in the U.K., Consort Digital in India and others. This foundation of increased distribution is directly leading to many potential opportunities that could be of significant size. We continue to increase the number of proof-of-concept trials by our customer base which we believe will translate into volume growth for our SD7 rugged devices and related accessories, especially now that we have achieved stock status at a major U.S. carrier.
Having said that, this is a process as these sales efforts require carrier sales force training, customer trials and technical support, and we remain focused on aggressively growing our revenue in this multibillion-dollar industry. We expect even larger volumes will follow as end customers grow to appreciate our unique offering in this new product category.
We also previously announced an exciting new product, the SD7 Plus, which features a wide-angle camera, coupled with 4G connectivity that will have traditional body camera functionality as well as real-time situational and traditional tracking capabilities. The SD7 Plus will be powered with Visual Labs' innovative body camera software. Visual Labs is a highly respected software company and developer of Android-based body cam software. The company provides its software to public safety, private security and other customers throughout the United States and internationally. Its public safety customers include town marshals, city police departments, county sheriff offices, wildlife and other state agencies and federal customers. We are starting customer trials and expect the SD7 Plus with body camera capabilities will be shipping in the coming months.
In addition, in June of this year, we announced a new product called Siyata Real Time View, together with a major order. This is an innovative real-time camera system installed in first responder and enterprise vehicles to provide better fleet management and control. In Q3, we installed our first units in ambulances at a leading international EMS customer, and the system provided outstanding results in real-time field cases. We continue to roll out this product to additional ambulances and EMS vehicles and expect this to be a great add-on to our product portfolio in 2024 and beyond.
And finally, we previously announced that we had expanded our sales team by hiring Doug Clark, who previously was an AVP and AT&T's FirstNet. In the brief time that Doug has been on our team, he has already helped us to develop new sales opportunities based on his career experience and positive reputation with our customers and carrier partners and we are very excited to have a person of his caliber on our team.
Now I would like to pass the line back to Glenn, who will discuss some of the industry trends and market dynamics that are benefiting our business and update on our product categories.
Glenn Kennedy
Thank you, Marc. On September 30, 2023, FirstNet announced it now supports approximately 5.3 million connections to 27,000 public safety agencies, a gain of about 1,000 agencies during the third quarter of 2023 from the figures they had released three months earlier. During the third quarter of 2023, FirstNet added approximately 300,000 connections. Siyata works closely with FirstNet and their growth is further evidence that U.S. first responder customers are moving towards Push-to-Talk over Cellular solutions.
Looking at our sales funnel, we continue to see strong opportunities in each of our three product categories. First, in our rugged handset product category, we are focused on growing sales of the SD7 PTT handset that supports mission-critical Push-to-Talk to North American and international wireless carriers. We displayed this handset at several trade shows during and after the quarter, including in August at the APCO 2023 show in Nashville, Tennessee and multiple regional shows in the U.S. in partnership with FirstNet.
The newly granted stocked status from a major U.S. carrier, the quantity of new customer trials, the customer feedback at the trade shows and the direct engagement from senior personnel within the wireless carriers have all been strong as these wireless carriers aim to capture new customers who have been using traditional LMR or two-way radios.
Today, we are active with all major North American carriers, as Marc mentioned, and also with TASSTA in Australia and KPN in the Netherlands as well as with multiple dealers and distributors in the U.S. and international markets. Our objective remains to expand our launch with additional North American and international carriers and with additional PTT application companies in the future. We have seen significant SD7 sales to first responders, schools, health care facilities, resorts, municipalities and more. Large U.S. school districts are replacing legacy two-way radios by purchasing SD7 handsets to use throughout the schools they serve to help keep their students and staff safe. We anticipate more school districts following suit in the current and coming quarters.
Recently, we announced a large purchase order for $750,000 of our rugged handsets from a single customer in partnership with Synch Communication for first responders in Israel. As a result of all SD7 market activity, we are confident that this will translate into multiple thousands of SD7 handsets sold throughout the balance of 2023 and in 2024, and we look forward to adding sales of the SD7 Plus with body camera capabilities in the coming months.
Secondly, in our in-vehicle devices category, we continue to sell through our UV350 in-vehicle device with customers in North America and internationally. We are experiencing increasing demand for our unique VK7 vehicle kit, which is a partner product to our SD7 handset. Several customers in the U.S., including some with yellow school buses, transit vehicles and snowplows are installing VK7 vehicle kits into their vehicles so that the SD7 handset can be easily used in the vehicle kit while their staff are in their vehicles. And also in the in-vehicle product category, prior to the third quarter of 2023, we received our first order, which was from $1.2 million for a new product called Siyata Real Time View, an integrated advanced video monitoring system for emergency management services, or EMS, providers in their fleet vehicles.
Marc mentioned that we have begun to install the system into ambulances and first responder vehicles during the third quarter of 2023, and we look forward to more sales opportunities for this solution in 2024. And thirdly, in our cellular booster product category, we saw reduced but still steady demand for cellular boosters throughout North America.
And now I will hand the line back to Marc for closing remarks.
Marc Seelenfreund
Thanks, Glenn. Overall, we are excited to see a growing number of customers choose to transition from legacy LMR devices to our Siyata PTT handsets and accessories. We are pleased that this is happening across a wide variety of vertical industries and across multiple geographical markets. We believe that the core fundamentals are now in place to grow our business both in North America and in international markets.
Our goal remains to ramp up sales to reach breakeven and then profitability as soon as possible, and this focus is shared by our entire Board and management team. We will file our third quarter 2023 financial results with the SEC on a Form 6-K and urge our listeners to access them from the SEC's website, search for Siyata Mobile. That concludes our formal remarks.
With that, operator, kindly open the call to questions. Thank you.
Question-and-Answer Session
Operator
At this time we will be conducting a question-and-answer session. [Operator Instructions] Your first question for today is coming from Jack Vander Aarde with Maxim Group.
Jack Vander Aarde
Okay, great. Good morning. Thanks for the update and taking my questions. Marc, let me just start with a quick question, a housekeeping question on the OpEx line. The third quarter 2023 total OpEx of $2.7 million. It looks like S&M expense has picked up, which makes sense to support sales growth but you guys meaningfully reduced G&A expense and overall OpEx is down pretty meaningfully is – which is good to see. Is this a normalized quarterly OpEx level going forward? Are there any puts and takes or onetime blips in this quarter? Or is this a good go-forward rate for an analyst perspective? Thanks.
Marc Seelenfreund
There are – first of all, hi, Jack. How are you? There definitely are some onetime expenses that you're not going to see going forward. And I think that it's actually a higher quarter than what you're going to see going forward. And I think that the general – the OpEx and also the G&A are going to be a little bit lower. So this is on the high side. It's not even standard.
Jack Vander Aarde
Got it. Okay. That's helpful to know. I appreciate that. And then – okay, so let me switch gears here to the more exciting stuff that I want to talk about, which is you mentioned you experienced some slight order delays due to this transition from a non-stock to a stock status with a large U.S. wireless carrier. And this seems like a big opportunity, clearly, that we've been kind of waiting for. So does this imply you had orders – just one thing right off the bat? Does this imply you had orders that you expected to receive in the third quarter that slipped into the fourth quarter? Or is this – was this kind of more of a pause as you signed the stock status deal and now you're preparing to train their team and get them caught up to speed? What's going on with the potential orders and delays? Thanks.
Marc Seelenfreund
So just to explain to you what this means. So if until now, AT&T or its distributors would sell our devices at MSRP at around $400. Now the way that they're going to be selling it is they are subsidizing it down to $0.99. And then you have to pay a certain price per month on your bill, and that's anywhere between, let's say, $20 to $30 per month. And that includes the device and the cellular package and the PTT package. So the minute that customers heard that they're not going to have to pay full MSRP that they're going to be able to get it subsidized and paid over, let's say, two years. Obviously, customers – it's much, much more attractive for them. Any customers that were thinking of buying a product pushed it out until it was a stock product.
So you can understand it's very clear that every customer would prefer to have it the way that we're doing it now. And this is basically the dream of every small vendor that works with the large carriers to have a product stock. It's not something that's trivial. It's a very unique for a company of our size. I would say that we are, by far, the smallest company that has a stock product and a major carrier in the United States. And yes, I think that, that's going to help drive sales dramatically in the coming quarters and going forward just because it makes it so much easier for customers to buy it and we're now sort of at the same level of playing together with the other companies that sell Push-to-Talk over Cellular devices that are mainly smartphones, more expensive than our product, but they are also subsidized.
So let's say, a Samsung product, which cost double the price of our product, maybe that customer will pay $40 a month and only pay $20 a month for hours, but both products are now $0.99, right? So in that sense, it's a home run for Siyata. And we expect that, that's also going to help sales in a big way going forward.
Jack Vander Aarde
Okay. Is there any way you – do you have any more specific or visibility into the timing of sales from this arrangement and just visibility into the size of the orders and revenue visibility, inventory planning? I mean, is there anything more tangible that you could point to that gives you confidence that this is the near term growth...
Marc Seelenfreund
So the only confidence that I have is from the discussions that we've had with the carriers, with the various sales teams, with various customers that we're starting to sell to and ramp up to. I can't give you an exact number because we're not there yet. And that's really the reason that we can't give guidance until now is because we don't have a track record of quarters that we understand what kind of sales we're going to get every quarter. I do believe that our coming quarters are going to be better than they were in the past. I can't give you an exact number, but just from the conversations that we're having, from the partnerships that we've built, from the fact that we have a stock product now, I think that they are going to be higher, even dramatically higher than what they've been until now. That's the plan and that's where we see it going.
Jack Vander Aarde
Okay. And then including the stock deal and just outside of it, everything all put together, as you're looking at the fourth quarter, we're about halfway through this fourth quarter now. Is there anything you could touch on just in terms of relative sales expectations as a whole? Are you expecting to grow above this third quarter that you just had? How is – what do you think from the year-over-year from the fourth quarter last year?
Marc Seelenfreund
So we expect to grow over the third quarter, and we expect to grow year-over-year. And we think that from this fourth quarter going forward, we're going to have much better quarters than we've had in the past. I wish I could tell you more, but I can't, not because I don't want to but it's because it's not an exact number right now. But from what we've seen in the first part of this quarter, what we see coming in for the second half of the quarter and what we see going into next year, we think that we're going to have much better quarters and much stronger sales than what we've had in the past.
And again, it's all based on the partnerships that we've built up over the past two years. It's not even a year. So over the past two years, all the partnerships, all the MSAs that we've signed with the various carriers, all the dealers from the carriers that we're working with, all the trials that we've done with the various customers, you take that, you put it all together, and that's what gives us a lot of confidence that the coming quarters, including this quarter can be much better than what you've seen in the past.
Jack Vander Aarde
Okay. Great to hear. And then maybe just one more for me. I did hear you mentioned it on the prepared remarks, but maybe just looking for more of a detailed update. What's the latest with the SD7 Plus opportunity and potential sales? Have you begun selling that device yet? Or is it something that's going to contribute to fourth quarter sales and meaningfully to 2024? Thanks.
Marc Seelenfreund
We're now doing trials with the SD7 Plus. I think that it will not – I know that it will not contribute in Q4, but we do believe that it will contribute next year. We have multiple opportunities for that product. We think that it's going to be a very good revenue generator for us going into 2024 and beyond. It's the only product that is going to be approved on a carrier network that will allow you to do both Push-to-Talk and have body camera software on it. There is nothing else that's like that out there. So we think it's going to be a great product for us. It's not going to contribute this year, but we do believe that it will contribute in 2024.
Jack Vander Aarde
Okay. Great. And can you just remind me, Marc, in terms of Real Time View and then the SD7 Plus with the body cam, are those two separate distinct recurring revenue opportunities? Is there any sort of a catch rate of Real Time View as well that you imagine with sales of devices?
Marc Seelenfreund
We only started selling that Real Time View, and I think it proved itself unbelievably in one of our customers. I mean, just to the fact that it was on the news, they called it the Siyata Black Box. We might even change the name into the Siyata Black Box because it's just – it did such a great job in picking up videos in critical situation. And we think that it's going to be a great device for us to be selling together with our in-vehicle products going both in Q4, but also in going into 2024. The fact that we're able to get recurring revenue from that is also great.
Again, we still don't have an exact number of what that's going to give us to the bottom line, what that recurring revenue is going to give us going forward. But as we sell more and more devices, we do expect to get recurring revenue from that product. Same thing with the body cam. So we work with third-party software companies. We have agreements with them that we get part of that recurring revenue, and that's how we're able to generate recurring revenue through our hardware. So both of those products, to your question, yes, they have a recurring revenue piece, and we're going to try to get as much as we can out of that so that we also have recurring revenue on a monthly basis.
Jack Vander Aarde
Okay. Great. And then actually, just one more question, just because I think it would be helpful for investors and for analysts perspective as well, just to get a sense of – and kind of gives us a signal of your confidence in visibility. Do you imagine any time in the next couple of months, maybe when you report the fourth quarter in March, when can we expect some sort of high end – higher general guidance ranges for revenue sales? Do you think you have enough visibility to provide any guidance or even informal expectations by the time next quarter rolls around?
Marc Seelenfreund
Yes. I think that by the end of the first quarter, we're going to have a very interesting first quarter just because it's going to be a quarter that sort of everything that we've been working on is going to come to fruition. And I think that by then, we might have a better understanding of what this stock product situation really means for us and sort of the pace that we're going to be on. That's sort of going to be a big part of our revenue.
And I'm not going to say it's going to be 30% or 50%, but it's definitely going to be a meaningful part of our revenue. And I think that probably by the end of the first quarter, we should be able to give some kind of guidance. And again, it's going to be – I'm not going to say that it's 100% of that guidance because we're still not there. But as we get more and more traction in the market and as we understand better, the sales cycle, how long it takes for customers to make decisions, how long it takes for us to get the orders and to produce products and to really pick up pace, I think that we'll feel more comfortable giving guidance. Not that I want to. It's out right now, I still can't. But I think that at the end of the first quarter, we'll already have more visibility. And then hopefully, quarter after quarter, we'll be able to give better visibility going forward what we think it's going to be.
Jack Vander Aarde
Okay, great. I appreciate the insight there and thanks for taking all my questions. I'll hop back in the queue.
Marc Seelenfreund
Thank you, Jack. Thank you.
Operator
Your next question is coming from Brian Lantier with Zacks Small-Cap Research.
Brian Lantier
Good morning gentlemen. Sitting in for Tom Kerr today. Just wanted to circle back to the Real Time View. And maybe if you could give me a little bit of insight into the verticals that you're seeing the most interest from right now and where you think the greatest opportunities will be for that product?
Marc Seelenfreund
Okay. So right now, we're very focused on EMS, and this is a great product for EMS. We're seeing a lot of success with ambulances, with other EMS-type vehicles. So that's certainly a vertical that we're very focused on. But also for commercial fleet, for security fleets, it's something that's very interesting. This gives the fleet manager a very high level of control to be able to know what's going on with that vehicle and actually see the vehicle remotely, whether from a control center or a command center or from their phone, they're able to put in certain information into their control centers so that if the driver is not driving correctly, if the driver goes out of a certain geo fence, it allows the fleet managers to really have much more control, but even more than that, it allows them to know what the driver is seeing when the driver is in certain areas. And that type of system is very desirable for a lot of fleet managers, they just want to have more control over their fleets. So that's sort of what we're doing. We're very cost effective. The device just works really, really well. You can put it on Android phones or on iOS, so you can really control it from any phone that's out there. So it's just – it's a very strong tool and we found that it's been working very well over the past two or three months. And therefore, we think that we'll be able to ramp up.
Based on this initial customer that we have, we're now doing trials with multiple additional customers. One of them is a very, very large security company that moves around money. So you can imagine what type of customer that is. They want to be able to understand how – where their drivers are and what the drivers are seeing and see 360 degrees around the car, exactly what those trucks are – what they're seeing. So there's a lot of different applications for that.
And by the way, this is not just good for the United States, it's certainly good for international markets, and we're showing this to all of the dealers that we deal with, both in the United States and in Europe and in other international markets because it's something that is very interesting for all different types of markets. So in that sense, it's good for the company because we're able to leverage the existing relationships that we have, just offering them a new product. Now we're obviously offering this together with our UV350, together with our VK7, SD7, so it's sort of part of our in-vehicle portfolio. So in that sense, it's a very good fit for what we're doing.
Brian Lantier
Good. Will there be a dedicated sales team for this product? Or will it be just a part of your suite of services?
Marc Seelenfreund
Just a part of our suite of services. My sales team, they know how to sell in-vehicle products. We're already going after in-vehicle customers. So it's basically, we're able to leverage our existing sales team to be able to sell this additional products.
Brian Lantier
Okay. Great. And looking at the burn, where you sit today post the financing in late October, if you could comment a little bit on your current financing needs going into 2024?
Marc Seelenfreund
Right. So I'm not going to say that we don't have to raise more capital because we will have to raise more capital at some point. We don't have to raise a lot of capital in our expectations, okay? If things work out the way that we hope they do and if we ramp up sales, the way that we expect to ramp up sales, we will have to raise another, I want to say, $2 million to $3 million to be able to support that growth. But it might not seem this way, but the company is not looking to raise capital every couple of months. We're not looking to do that. We're looking to raise enough capital to get us to breakeven profitability. And once we're there, we want to be off to the races. And we think that we're very close. We think that we're going to have very strong quarters going forward. And with those strong quarters, we'll have to raise another few million dollars to support them. But once we're there, we'll hopefully be able to grow the company just from our ongoing sales and profits and whatnot. And we think that we're going to get there in the coming quarters, we think that's very realistic.
Brian Lantier
Great. And just a housekeeping number to update my model, the total outstanding shares currently 3.7%, is that in the ballpark?
Marc Seelenfreund
No. I think it's closer to 4.2%, but you have to look on our presentation to get the exact number, but I think it's around 4.2%.
Brian Lantier
Okay. All right. Great. Thank you, guys.
Marc Seelenfreund
Thank you.
Operator
We are at our allotted time for this call. And I would now like to turn the call back to Marc for closing remarks.
Marc Seelenfreund
Thank you very much for attending this call. We appreciate it. If you have any additional questions, you're welcome to reach out to us and send us an e-mail. And we look forward to keeping you updated as we progress. Thank you very much, and have a good day.
Operator
This concludes today's conference call. You may disconnect your phone lines at this time. Thank you for your participation.
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Siyata Mobile Inc. (SYTA) Q3 2023 Earnings Call Transcript