Boxlight Corporation (BOXL) Q4 2020 Earnings Call Transcript

Boxlight Corporation (NASDAQ: BOXL) Q4 2020 earnings call dated Mar. 25, 2021

Corporate Participants:

Michael Pope — Chairman and Chief Executive Officer

Mark Starkey — President

Patrick Foley — Chief Financial Officer

Analysts:

Allen Klee — Maxim Group — Analyst

Brian Kinstlinger — Alliance Global — Analyst

Presentation:

Operator

Thank you and welcome to the Boxlight Fourth Quarter and Full Year 2020 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 laws, 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 the actual results to differ materially from the forward-looking statements. A detailed discussion of such risks and uncertainties are contained in the company’s most recent Form 10-K, Form 10-Q, and other reports filed with the SEC. The company undertakes no obligation to update any forward-looking statements.

On this call, management will refer to non-GAAP measures that, when used in combination with GAAP results, provide additional analytical tools to understand the company’s operations. The company has provided reconciliations to the most directly comparable GAAP financial measures in the earnings press release, which will be posted on the Investor Relations section of the company’s website at investors.boxlight.com. And with that, I will hand the call over to Boxlight’s Chairman and Executive Chief Officer, Michael Pope.

Michael Pope — Chairman and Chief Executive Officer

Good afternoon everyone and thank you for joining our fourth quarter and full year 2020 earnings call. Despite the COVID-19 pandemic that has caused challenge and disruptions to traditional communication in both education and business settings, we closed the fourth quarter with record customer orders and outperformed our revenue and earnings guidance. For the quarter, we reported customer orders of $33 million, revenues of $32 million, and adjusted EBITDA a positive $400,000. We also ended the year with $11 million in back orders, the strongest pipeline in our history for both the U.S. and EMEA, and a healthy balance sheet including $13 million in cash, $21 million in working capital, and $45 million in stockholders’ equity.

We are seeing an increased demand for our solutions this year and we expect to report the first quarter of 2021 with revenue greater than $28 million and positive adjusted EBITDA. Although we will not be providing guidance at this time for the full year 2021, note that the first quarter is seasonally slow and has historically accounted for less than 20% of our annual sales. We are benefiting from a robust and growing market for interactive hardware and software solutions with increased spending in both the education and corporate sectors.

Education systems in particular are accessing large budget allocations for technology supported by substantial government funding as they outfit classrooms with solutions for virtual, hybrid, and traditional learning. As a company, we see a unique opportunity to take advantage of this expanding market and capture additional market share by optimizing our sales channel and promoting our best-in-class solutions and exceptional customer support.

In September of 2020, we acquired Sahara Presentation Systems, our most significant acquisition to date with a purchase price of approximately $74 million. I’m happy to report that the integration has been overwhelmingly seamless and we are reaping the benefit of our global scale, additional seasoned leadership, expanded product suite, combined sales channel, and dramatically improved financial position.

Our five-member executive team today includes three executives from the Sahara transaction namely Mark Starkey as President and Head of Global Sales, Pat Foley as Chief Financial Officer, and Shaun Marklew as Chief Technology Officer. You will hear from both Mark and Pat during our remarks today. Although we are headquartered in Atlanta, Georgia, we are a global company with nearly 200 employees, of which approximately 100 are positioned throughout Europe in countries including the United Kingdom, Germany, Holland, Sweden, Finland, and Belgium. We’re are also supported by thousands of representatives globally through our distributors and reseller partners who promote our range of solutions to the education, corporate, and government verticals.

We have sold our award-winning Clevertouch, Mimio, and Boxlight brands into many of the largest organizations and education systems worldwide. Earlier this week, we announced the acquisition of our Clevertouch distributor in Belgium and Luxembourg, extending our footprint in Europe. This transaction is part of a broader strategy to both improve our profit margins and maintain stronger relationships with our reseller channel and end users.

We have closed 10 acquisitions as a company since 2016 and will continue to be acquisitive with a focus on geographic expansion. However, our primary focus as a company is to take advantage of the current market conditions and our unique offering to drive strong organic growth. With that, I will now turn the call over to our President, Mark Starkey, to provide additional color on our sales efforts for the quarter.

Mark Starkey — President

Thank you, Michael and I’m calling in today — tonight from a very dark London, so hello everyone. It certainly is an exciting industry and I would like to reiterate your point about how smooth the integration of the Sahara business into Boxlight has been. It literally could not have gone any better. I would also like to take this opportunity to thank all our staff and customers who have helped contribute to our success in Q4. During the fourth quarter, we booked over $33 million in orders from our partners. That represents a 453% growth in order intake year-on-year. Some of our key orders included $4.2 million from D&H in the U.S.; $2.8 million from Trox in the U.S.; $2.8 million from our partner in Denmark, Unit DK; $1.6 million from our partner in Australia, ASI; $1.3 million of orders from our partner in France, Speechi; $1.2 million of orders from Tierney in the U.S.; $870,000 [Phonetic] from our partner in Spain, Charmex; and $668,000 from one of our partners in the U.S. IDNS to highlight just a few.

It is worth noting that in some countries such as Australia, Denmark, Spain, and France, we have a single distributor running the territory, but in other key markets such as the U.S., U.K. and Germany, we run our own channel with many resellers. We have over 1,000 active partners globally, including approximately 500 in the U.K., over 300 in the U.S., and over 70 in Germany. During Q4, per Futuresource Consulting, we retained the number one market share position for interactive flat panels, IFPDs, in Australia and Denmark. Overall, our Q4 market share in EMEA was 6.6% of the IFPD market, just behind Samsung who had 7.7% market share.

The IFPD market in EMEA is currently worth $1.26 billion per annum. The U.S. market for IFPDs is marginally bigger than EMEA at $1.27 billion and our Q4 market share was 6.1%. This represents a significant growth in market share for Boxlight and our ambition is to be a Top 3 spot in both EMEA and the U.S. in the very near future with our ultimate goal to take the number one spot. To put that into context, we would need to have approximately 15% market share of IFPDs in a market currently worth approximately $2.5 billion in order to take the Top 3 spot.

In addition to IFPDs, we are also growing in other product categories, including software such as our SaaS-based MimioConnect platform, STEM, professional services and accessories, all of which have high growth expectations and deliver high margins. The total EdTech market is worth in excess of several hundred billion dollars and there is huge room for us to grow within this market. Outside the U.S. and EMEA, our Latin American business is growing through key partners in Puerto Rico, Colombia, Peru, and Costa Rica. In Australia, we have grown from almost nowhere to become the number one brand in IFPDs over the past 18 months.

In Asia, we are developing opportunities with partners in Singapore, Vietnam, Thailand, and Indonesia predominantly in the private school sector. In Africa, we have a strong partnership with a distributor in South Africa called Interactive AV Solutions, who is actively selling our solutions across Namibia, Botswana, big [Phonetic] Nigeria and Ethiopia. In terms of end users, we have literally hundreds of fantastic wins across the globe from Australia to Austria in Europe, from the UAE in the Middle East to the USA and from Sweden to Russia. One notable win was at Shelby County in Kentucky. The customer saw the value in our Clevershare software suite and Clever Message solutions which differentiated us from the competition.

We also had another great win at Sundown ISD in Northwest Texas. The district stated that the reliability and ease of use along with the Clever Message and Clevershare were key factors in choosing our Clevertouch solutions. In Germany, our revenue in Q4 grew at 195% year-on-year and we won many orders, but a couple stand out, in particular, a project with our partner, Bechtel, to supply a UX Pro solution to the German Army. We also won another project in Germany with our partner, VIDEOTON Stein to supply our solutions into the German government.

In EMEA, approximately 14% of our Q4 revenues were sold to non K-12 end users such as healthcare, government, and corporate organizations in sectors such as financial services, manufacturing, and retail. Typically, our corporate revenues would be at least 20% of total revenue in EMEA, but this sector has been widely impacted by COVID during 2020 compared with the education sector. The reason that this is so important is that the gross margin achieved on our corporate sales is much higher, achieving 45% on average in Q4.

Given the higher margins achieved in corporate and the fact that we believe the non K-12 opportunity is significant, we have decided to launch a dedicated sales team in the U.S. with the sole focus of developing these market opportunities. This team will be led by Dan Deem, SVP of Corporate Sales in the U.S. Prior to Dan joining us in September last year, he spent three years as Senior Director of Visual System Sales at Panasonic. We look forward to sharing the progress of this team in the future as the economy starts to reopen and our solutions, which are ideally suited to work with the likes of Zooms, Teams, and Cisco WebEx begin to gain traction in the U.S. market.

Our strategic partnership with Samsung has continued to progress over the last several months. We have developed our MimioConnect software so that it can be deployed directly on Samsung’s Tizen operating system and we expect that all Samsung IFPDs in the education market will ship with the MimioConnect Companion app from this summer. We have also developed our go-to-market plan with Samsung so that both sales teams have the ability to sell the solution into the channel.

This has not been a quick task as changing the go-to-market sales processes within Samsung, a $200 billion company, is complex and has taken a huge amount of effort over the past six months. However, I am pleased to announce that the systems have now been put in place and we expect significant revenues to start flowing in Q2 this year in readiness for the main education season. We look forward to discussing the ongoing relationship with Samsung and progress over the coming months.

Finally, I would like to reference the significant amount of emergency funds that are being made available for education as a result of COVID. In the U.S., the $2.2 trillion CARES Act provided $30.7 billion for education. The $900 billion COVID Relief Act, signed into law in December, provided a further $82 billion and the $1.9 trillion American Rescue Plan, signed into law this month, provided $168 billion. In total, we estimate that there is approximately $3,000 for every school child in public education in the U.S. and circa $70,000 available per classroom. All of the solutions that Boxlight in the U.S. are eligible for these funds and we are actively working with school districts to ensure that the funds are correctly spent.

It should also be noted that Boxlight is the only Top 5 IFPD supplier in the U.S., which is not directly owned by a foreign entity. The other four providers are either Chinese or Taiwanese-owned and we are starting to educate our partners and end users on the importance of security and data sovereignty. In summary, Q4 was a very strong quarter in terms of order intake and revenue and we continue to develop our key partnerships and alliances across the globe. I would now like to hand back to Michael.

Michael Pope — Chairman and Chief Executive Officer

Thank you, Mark. In addition to the significant investment in our global sales organization, we are also completely committed to product innovation and are proud of the vast awards and accolades we have received in recent months for our various solutions including our line of interactive flat panel displays, MimioConnect Blended Learning Software Platform, MyStemKits, Virtual STEM curriculum, Robo 3D printing solution, and Professional Development content for Extending Learning Beyond the Classroom among others.

This month we announced the grand opening of our virtual classroom in Atlanta, Georgia, which is fully staffed and available for live virtual demonstrations of our full solution suite. We also opened our Clevertouch Gallery located in Central London with [Technical Issues] key demonstration space, a boardroom, unified communications huddle space, an informal meeting area for partners and colleagues.

Last November, we appointed Dr. Don Gemeinhardt as Director of Strategic Funding and Grants at Boxlight to provide an additional resource to K-12 school districts in need of support to access various education grants as well as the nearly $200 billion in federal funds available to K-12 education from the CARES Act, Coronavirus Response and Relief Supplemental Appropriations Act, and American Rescue Plan. Dr. Gemeinhardt plays a key role in helping education leaders and administrators understand the requirements under the various programs and match solutions needed to solve existing problems and challenges such as returning to the classroom safely and bridging the student learning gap. With that, I will now turn the call over to our CFO, Patrick Foley.

Patrick Foley — Chief Financial Officer

Thanks, Michael and good evening to everyone. This is our first full quarter where we are reporting the combined results of Boxlight and Sahara. To further expand on what you’ve already heard from Michael and Mark, I would like to add a few figures to provide context to Boxlight’s international operations. From a revenue by country and region perspective, our total revenue in Q4 was $31.9 million, of which EMEA represented 64%, the U.S. 30%, the Rest of the World 6%, which was mainly Australia.

In terms of customers, the Top 10 customers represents approximately 54% of the total sales in Q4 with the single largest customer just under 10% and these are based across a number of markets, mainly the U.S., Denmark, France, Australia, Finland, Spain, Belgium, and the U.K. Nearly two-thirds of total sales are covered by the Top 20 customers. In relation to sales, product mix, and gross margin, in Q4, displays remained the largest proportion of total revenues at 73%. These are largely IFPD sales of Mimio and Clevertouch screens with related accessories generating further 14.2%, the Sahara legacy distribution business was approximately 10%, and the balance coming from software, services, and STEM.

Adjusted gross margin for the quarter was 26.4%. The IFPD margin was approximately 27% which would have been slightly higher. However, due to increased global shipping costs, margin reduced by 2 percentage points to 3 percentage points. Although we’ve seen a slight reduction in global freight and shipping costs, it still remains higher than normal and will impact the next two quarters. In relation to screen sizes, we have seen in recent years the trend to larger format displays and in Q4 ’20, this continued within the education sector at 75% of all Mimio and Clevertouch IFPD sales with 75-inch and 86-inch panels.

I will now review our fourth quarter and full year 2020 results. Our financial results for the three months ended December 31, 2020 were as follows: revenues for the three months ended December 31 were $31.9 million compared to $5.9 million for the three months ended December 31, 2019 resulting in a 437% increase due primarily to the acquisition of Sahara in September 2020. Gross profit for the three months ended December 31, 2020 was $3.6 million as compared to $1 million for the three months ended December 31, 2019. Gross profit margin for the three months ended December 31, 2020 was 11.2% compared to 17.6% for the three months ended December 31, 2019, resulting in a decrease of 64 basis points.

The change in gross profit was mainly due to Sahara purchase accounting adjustments which resulted in a decrease to gross profit of $4.8 million. However, taking this into consideration, the normalized gross profit rate for the three months ended December 31, 2020, was $8.4 million or 26.4%. This was slightly down year-on-year principally due to the increases in global shipping costs which impacted margins somewhere between 2 percentage points to 3 percentage points.

Total operating expenses for the three months ended December 31, 2020 were $11.1 million compared to $4.2 million for the three months ended December 31, 2019. The increase resulted from additional overhead costs associated with the acquired Sahara operations in September 2020. Other income expense for the three months ended December 31, 2020 was net expense of $1.9 million compared to net other income of $0.2 million for the three months ended December 31, 2019.

The increase in other expense was due to $0.7 million of increased interest expense associated with increased borrowings, $0.8 million of losses recognized on the settlement of certain debt obligations that were exchanged for common shares, and $0.7 million of gains that were recognized in 2019 upon the remeasurement of certain derivative liabilities.

The company reported a net loss of $8.6 million for the three month ended December 2020 as compared to $2.9 million for the three months ended December 31, 2019. The net loss attributable to common shareholders was $8.9 million and $2.9 million for the three months ended December 31, 2020 and 2019, respectively, after deducting fixed dividends to Series B preferred shareholders.

Comprehensive loss was $3.3 million and $2.8 million for the three months ended December 31, 2020 and 2019, reflecting the effect of cumulative foreign currency translation adjustments of $5.3 million and $0.1 million for the three months ended December 31, 2020 and 2019, respectively. The resulting EPS loss for the three months ended December 31, 2020 was $0.17 loss per diluted share compared to $0.26 loss per diluted share for the three months ended December 31, 2019.

Adjusted EBITDA for the three months ended December 31, 2020 was income of $0.4 million as compared to a loss of $2.6 million for the three months ended December 31, 2019. Adjustments to EBITDA include stock-based compensation expense, gains/losses from the remeasurement of derivative liabilities, restructuring costs, acquisition costs, and the effects of purchase accounting adjustments in connection with the Sahara acquisition. Adjusted EPS for the three months ended December 31, 2020 was $0.01 per diluted share compared to $0.24 loss per diluted share for the three months ended December 31, 2019.

At December 31, 2020, Boxlight had $13.5 million in cash and cash equivalents, $21 million in working capital, $140.4 million in total assets, $24.6 million of debt, $44.9 million in stockholders’ equity, 53.3 million common shares issued and outstanding and 2.9 million preferred shares issued and outstanding.

The financial results for the year ended December 31, 2020 had revenues for the year ended December 31, 2020 of $54.9 million compared to $33 million for the year ended December 31, 2019, a 66% increase. The increase in revenues was largely a result of the acquisition of Sahara in 2020. Gross profit for the year ended December 31, 2020 was $9.9 million compared to $8.9 million for the year ended December 31, 2019, a 10% increase. The gross margin decrease from 27.1% to 18% was driven by the effects of certain Sahara purchase accounting adjustments of $5.1 million. The resulting normalized gross profit rate for the year ended December 31, 2020 was 27.2% compared to 27.3% for 2019, showing a slight decrease due to increased global shipping costs.

Total operating expenses for the year ended December 31, 2020 were $22.6 million as compared to $17 million for the year ended December 31, 2019. The increase relates to additional overhead costs of the acquired Sahara operations and other income and expense for the year ended December 31, 2020 was a net expense of $4.3 million as compared to net expense of $1.3 million for the year ended December 31, 2019. The increase in other non-operating expense is primarily due to $1 million of additional interest from the increased borrowings, $1.5 million increase in losses incurred from the settlement of certain notes, and $0.4 million of increased expense resulting from the fair value remeasurement of derivative liabilities.

The reported net losses were $16.2 million and $9.4 million for the years ended December 31, 2020 and 2019, respectively. The net loss increased by $6.8 million. However, this includes $6.6 million GAAP expenses, items related to the Sahara acquisition: $1.6 million amortization of intangibles, $4.2 million fair market value inventory purchase accounting adjustments, and $0.8 million fair market value deferred revenue adjustments. Net loss attributable to common shareholders was $16.5 million and $9.4 million for the year ended December 31, 2020 and 2019, respectively, after deducting the fixed dividends to Series B preferred shareholders.

Comprehensive loss was $10.9 million and $9.3 million for the year ended December 31, 2020 and 2019, reflecting the effect of cumulative foreign currency translation adjustments of $5.2 million and $0.1 million for the year ended December 31, 2020 and 2019, respectively. The resulting EPS loss for the year ended December 31, 2020 was $0.39 per diluted share compared to an $0.88 loss per diluted share for the year ended December 31, 2019.

Adjusted EBITDA loss for the year ended December 31, 2020 was $1 million, an improvement of $4.7 million compared to $5.7 million loss for the year ended December 31, 2019. Adjustments to EBITDA include stock-based compensation expense, gains/losses from the remeasurement of derivative liabilities, restructuring costs, acquisition costs, and the effects of purchase accounting adjustments in connection with the Sahara acquisition. The adjusted EPS for the year ended December 31, 2020 was $0.02 loss per diluted share compared to $0.53 loss per diluted share for the year ended December 31, 2019. And with that, we’ll open up the call for questions.

Questions and Answers:

Operator

[Operator Instructions] We will take our first question from Jack Vander Aarde with Maxim Group. Go ahead, your line is open.

Allen Klee — Maxim Group — Analyst

Hello, this is Allen Klee for Jack. The first question is on the Samsung partnership. You talked about how that’s going to — it looks like that’s going to ramp up. Could you give us a sense of how it was in the fourth quarter and how you think about kind of what the whole — what the revenue opportunity is in ’21 and longer-term?

Mark Starkey — President

Yeah, do you want me say, Michael?

Michael Pope — Chairman and Chief Executive Officer

Yeah, how about you start and I can fill in if needed.

Mark Starkey — President

Yeah, sure. So in terms of Q4, well, I mean we’ve had a — we’ve started to do a very few number of sales with Samsung, but really the vast majority of the time, we’ve had to rework the go-to-market plan so that both our sales team and their sales team has the ability to take this to market and that really has been quite complex in terms of figuring out how the channel can buy the Samsung solution including our software, which is embedded on their product. So the minimal numbers at the moment. So our expectation is from Q2 we should be ready with this to really hit the market properly and both sales teams will be able to sell it easily.

Allen Klee — Maxim Group — Analyst

Thank you. And then for your just announced acquisition of Interactive Concepts, I think in the press release it said $6.5 million of revenue last year positive earnings. How should we think about how that can impact — like the benefit you get from owning that and the contribution that might have?

Michael Pope — Chairman and Chief Executive Officer

Yes, Allen, couple of thoughts on that. So the first one is the purpose of the acquisition as we mentioned in the press release and also in our remarks today was number one to improve our profit margins. So, of course, us owning a distributor and selling direct to the reseller partners, we pick up additional margin and that’s a major focus for us as a company is to improve our gross profit margins, but then secondarily, it’s to maintain stronger relationships with our reseller channel in that territory, which is going to help us grow sales in the territory.

With that being said, we also mentioned in the press release that we were seeing tremendous growth in that Benelux region, 25% year-on-year growth. I think it can grow quite faster than that and it’s a significant area of Europe. If you look at that Benelux region, it’s about 6% of the total European population. So it’s important to us strategically. So as far as kind of what it could mean for us is, again, higher gross profit margins, but then also with greater sales growth. We’re going to generate, of course, more to our bottom line ultimately.

Allen Klee — Maxim Group — Analyst

Thank you. In regards to MimioClarity, you mentioned how this is going to get coordinated into Samsung, but overall, can you give us a sense of what this can mean for revenues in ’21. And also I think last quarter you said you sold about 300 units and can you share like how many units were sold in 4Q?

Michael Pope — Chairman and Chief Executive Officer

Yes, so with MimioClarity, for those that aren’t familiar, that’s our audio solution and we don’t have a partnership with Samsung per se on MimioClarity. We can bundle our MimioClarity solution with Samsung, but the focus with Samsung is on two things, it’s our MimioConnect software platform. So that’s our SaaS-based education platform and then also the professional development services that we’re offering including the online self-paced learning modules that we’re bundling with the Samsung solutions.

As far as MimioClarity though, our audio solution, we are actually starting to see significant sales of that solution. We have a couple of large contracts that we’ve won and we’re installing those solutions now. We haven’t broken out the sales to this point in time of what that is but I think that’s something we can do, Allen, for our next earnings call after the next quarter, but I would tell you that the opportunity with MimioClarity is as big as it’s ever been and we are indeed selling a large number of those units and delivering a large number of those units.

Mark Starkey — President

I would add to that, Michael, I would say that we can’t make them quick enough is what I’d say, right. So we need to make them far more quickly because there’s significant demand.

Allen Klee — Maxim Group — Analyst

That’s great and then one last question and then I’ll get back in the queue. For a couple of others, I’ll ask later. Just in terms of kind of your mix of some of your end markets, I think you previously mentioned that Sahara’s revenues was 15% corporate, 85% education. I was kind of wondering if you think that mix is going to change and also you talked about how you’re trying — you have STEM and software, which are higher margin. First, can you talk about if you think like the mix of these particular things might change in ’21?

Michael Pope — Chairman and Chief Executive Officer

Listen, Pat, do you want to address — [Speech Overlap]. Yeah, Pat, I’d like you to address kind of where we ended up for the quarter so Allen [Speech Overlap] and then I can fill in after that how I think it’s going to turn.

Patrick Foley — Chief Financial Officer

Yeah, so in terms of the Sahara kind of revenues for Q4, the pro as we call it, the kind of the pro markets that we deliver is about 15%, i.e., the corporate market of the total IFPD that went out as Clevertouch products and then the balance being education. So it was quite a significant part of that and it is very lucrative in terms of margin.

Michael Pope — Chairman and Chief Executive Officer

Yeah and I would add to that, we talked about Futuresource who puts out some research that we follow and if you look at the Futuresource reports, they actually show for 2021, they expect the corporate market of all IFPDs would be about 25% in EMEA and about 16% of total IFPDs in the U.S. So if we’re looking at the future, we at a minimum, we had a trend closer to those numbers about 16% of our total sales in the U.S., 25% in EMEA and I think that we can perhaps start to even exceed those numbers because we’re putting more focus on it and you heard Mark talk about the reason for that focus and it’s number one there’s a massive need, there is not a lot of great providers that are providing interactive flat panels with all the other solutions you need to be successful in those environments, but secondarily, there is, it’s higher margins and because of the higher margins, that makes it even more attractive.

Allen Klee — Maxim Group — Analyst

That’s great. Congratulations. Thank you. I’ll get back in queue.

Michael Pope — Chairman and Chief Executive Officer

Thank you, Allen.

Operator

[Operator Instructions] At this time, we will take our next question from Brian Kinstlinger with Alliance Global. Your line is open.

Brian Kinstlinger — Alliance Global — Analyst

Great, thanks. Can you hear me?

Michael Pope — Chairman and Chief Executive Officer

Yeah, we can hear you, Brian.

Brian Kinstlinger — Alliance Global — Analyst

Hello Oh, great, great hi, can you — you mentioned the market share gains that Clevertouch made this year. Can you talk about what you think is driving those gains? How Clevertouch is differentiated if at all and then with the merger with Boxlight, how you can even further differentiate that product to gain more share?

Michael Pope — Chairman and Chief Executive Officer

Yes, Brian. I’ll speak a little bit and then Mark, feel free to jump in if you’d like. So first off, as far as differentiation, we have the most comprehensive solution suite on the market for education. We also have a quite comprehensive solution suite for corporate and government, but first, speaking to education. Our solutions includes, of course, interactive flat panels that we’ve talked about but beyond that, we sell software, we sell accessories, we have STEM solutions, we have our professional services team where we provide training, professional development, and it really is that broader unique offering that makes us more competitive.

And if you start with any one of those solutions, we also feel that we have a superior product than most of our competitors out there. So if we’re just competing on interactive flat panels, we believe that we have a superior interactive flat panel than most of our competitors and we can be competitive on price as well but when you tack on the software and accessories and the services piece, we think we can win out most of the time when we compete in the market.

Brian Kinstlinger — Alliance Global — Analyst

Great and then you mentioned the CARES Act and other funds that are being made available to the schools for a variety of reasons in the U.S. Are all of the or most of the school systems you talk to aware of these funds or do they need to be educated and that’s where the channel partners come in, I guess I’m curious, are they coming to you knowing they have access or do you have to educate them?

Michael Pope — Chairman and Chief Executive Officer

Yes, so we don’t have to educate them on the funds, everybody knows about the funds and the funds generally are allocated by state and then by the states down to the school districts, but the school districts don’t just get the funds. Typically, there has to be some type of application process to access the funds and so the answer is yes, they know about the funds. Of course, they do, but in some cases, they don’t quite understand how to access the funds and even if they know how to access the funds, they may or may not have the resources or wherewithal to prepare the documentation to request the funds and that’s where we hired an in-house grant writer who helps with that and we’re marketing that person.

We also, if you go to our website and look at email campaigns that we do, we talk about helping educators access these relief funds and then we can provide a lot of that help, but what it comes down to is in some cases, preparing the grant paperwork or the request documentation to access of funds. It could be quite a long document and there’s a lot that goes into it and we do have resources including this grant writer that can help the school districts be able to apply and receive the funds.

Brian Kinstlinger — Alliance Global — Analyst

Great, I have a few more. First of all, you mentioned, which I think was bullish that the first quarter normally is less than 20% of revenue, but when I take the combination of the two companies, but then I add the Samsung opportunity which may be meaningful too as well as some other catalysts, does it seem to you possibly that, that may be even less of a percentage than it typically is this year or is it too soon to tell?

Michael Pope — Chairman and Chief Executive Officer

Yes, it’s probably too soon to tell because there is a few things that are going into play. One is Samsung, of course, if that ramps, of course, that would make a difference. How soon these federal funds enter the market, that could play into it. Also buying habits have shifted a little bit of course with COVID and initially, a lot of the buying habits shifted to address the initial needs and now they are flexing back the other way to address traditional classroom needs. So I think it’s tough to tell, but our best estimate is roughly what we provided and our guidance you’ll remember was $28 million for Q1 and then typically Q1 is less than 20%. So you can get an idea of how we’re trending for the year based on those numbers.

Brian Kinstlinger — Alliance Global — Analyst

And with all of the pieces such as Samsung, STEM, the services around it. I guess I wanted to ask about the gross margin, if I look at the adjusted 26.4% notwithstanding freight costs coming down, if we push that aside, do you — in the past you expected to gain a little bit of margin throughout the course of the year. Do you still feel that way of the 26.4% and just kind of take us through with the mix and how that might change a little bit?

Michael Pope — Chairman and Chief Executive Officer

Yes. So still feel like we can improve that. Keep in mind that 26.4% was not including the adjustment of 2 points to 3 points on freight costs, right. So if you take the 26.4% plus 2 points to 3 points, that’s getting you closer to that 30% number. In the past, we talked about we ought to be 25% to 30% and we ought to be on the high-end of that approaching 30%. I think this is going to be that year where we can start to demonstrate additional improvement in gross profit margin and we definitely push that 30% margin number.

But looking at the future years, we’ve always said and this is still the case that we know we need to be higher than that and that’s going to happen as we improve our product mix, as we’ve talked about including selling more of our higher margin accessories and our professional services and our software solutions, which are high margin. That’s how we’re going to get there. We’re not going to get there by keeping the same product mix we have today, which is predominantly our active flat panels.

Brian Kinstlinger — Alliance Global — Analyst

Yeah, lastly, on the acquisition you made this week with Interactive Concepts. Is there a pipeline of similar channel partners or distributors sorry that you’re evaluating in various geographies in Europe given wanting to be closer to the customer and the reseller?

Michael Pope — Chairman and Chief Executive Officer

The answer is yes. Yeah, there are several others we’re looking at. So we’ll have to see how that plays out over time, but our model is ideally in most cases an exception to this, but in most cases, our model is that we want to be closer to the reseller partners and to the end users where we can again have those higher margins by cutting out that distributor but then also where we have a lot more influence and we think us having more influence that’s going to result in a higher sales growth versus just relying only on the distributor.

And keep in mind the distributors sell a lot of other solutions besides our solutions and so we’re competing sometimes to be able to get market share from that distributor of their business and so generally, yes, there is going to be others, we’re looking at others and we hope to announce additional opportunities in future quarters.

Brian Kinstlinger — Alliance Global — Analyst

I guess you’ll treat me to one more question that Allen was trying to ask. This company — this distributor did $6.4 million in revenue, how much revenue do you generate through that distributor. I guess I’m curious how much you did versus kind of the other technologies out there?

Michael Pope — Chairman and Chief Executive Officer

Yeah, we didn’t report that number, but to give you an idea about half of their business came through Clevertouch, about the other half came through other distribution. So you could run some numbers on that. And in addition to their revenues of the 6.5 [Phonetic] you can run the numbers on the 6.5 [Phonetic]. they were quite profitable. So I think we said profitable, but they were quite profitable and that’s going to hit our bottom line.

Brian Kinstlinger — Alliance Global — Analyst

Great, thanks so much.

Michael Pope — Chairman and Chief Executive Officer

Yeah. Thanks, Brian.

Operator

And we will take our last question from Jack Vander Aarde. I believe that’s Allen in for Jack. Please go ahead, your line is open.

Allen Klee — Maxim Group — Analyst

Yes, hi. two quick questions, the first one, remind us, so you said you did $33 million of customer orders. Remind us how you define that? If that means future orders and if so, over what time period do you think you, you close on them because — and I’m asking that related to how you think about the impact of what’s going on with container ships and things like that and how you feel about your levels of inventory. I think you ended the year at around $21 million. So is that, do you think that you might have a challenge of enough inventory or do you have ways of working around that.

Michael Pope — Chairman and Chief Executive Officer

That’s a great question, Allen. The answer is, there has been a little bit of a challenge to manage the supply chain because of the challenges of shipping and shortages of certain components and things. We’ve managed it okay and we don’t believe there will be an impact to our numbers. So as far as our inventory levels, they are healthy, we’re in a good place with inventory. The question around customer orders, that $33 million that’s orders we actually received during the quarter, but we didn’t ship, right. That’s what that means. And then of course we had a $30 million or $32 million in sales for the quarter. So that $32 million in sales, those are — that’s of course solutions that we’ve delivered or shipped. As far as $33 million — or excuse me, as far as we ended the quarter with back orders I believe it was —

Patrick Foley — Chief Financial Officer

$11 million.

Michael Pope — Chairman and Chief Executive Officer

$11 million. Okay. The $11 million backorders [Speech Overlap] that $11 million would be shipped in Q1. I mean it was recognized that $11 million Q1, There would be minimal, if any, that was not recognized in Q1. And so, as far as how long did it carry over, what’s going to be left [Phonetic] in the quarter in almost every case.

Mark Starkey — President

So just to add to that point. Michael, just asking Allen point about supply chain and the challenges obviously, every business is seeing globally in terms of supply chain. So one of the things we have done, obviously, we have a strong balance sheet and through Q4 we knew this was coming up as a supply chain challenge for the business globally. So we’ve been actually pre stock building, so actually countering those challenges in readiness to have the stock available to sell and we have and we do the same thing through Q1 and forwards. So that’s one thing, we’re always looking out on the planning horizon in terms of our supply chain three, six months, at least ahead in terms of what’s needed in terms of our planning.

Allen Klee — Maxim Group — Analyst

Great and then one other thing I think, Bryan, touched on this, I’ll try to ask it a little different of just of the seasonality in the different quarters and you mentioned 1Q is your seasonally slowest, but I took a look over the last five years and if you looked at 4Q’s revenues compared to 1Q revenues, there is really no consistent pattern. It’s up some years. some years it’s — so it seems to me that like it’s a pretty equal chance that it could be up sequentially or so. I’m just wondering why that’s not the case based on your best judgment today?

Michael Pope — Chairman and Chief Executive Officer

So let me say a couple of thoughts and you can step int. So if you look at Boxlight historical, we are a much smaller business and as a smaller business, one large order right could swing a quarter pretty substantially and so, if you’re looking at again quarters from ’18, ’19 and then first part of ’20, we did have some large orders, and you would see swings in those quarters. Now that we’re a much larger business and the concentration of one order or one partner is much smaller, you’re going to see more normalized approach to evaluating the quarters and you’re not going to see that same variability. But you’re right, I mean the potential there could be a large number of orders or in our case now would be several significant contracts that would be able to swing a quarter abnormally but I think we feel pretty good about that 20% guidance for Q1. We ought to be around that number if you’re looking out to the future for Q1.

Allen Klee — Maxim Group — Analyst

Okay. Thank you so much.

Mark Starkey — President

This is Mark. Very briefly to add, in terms of seasonality as a global business, don’t forget that Northern, Southern hemisphere summer periods are different some holiday scheduled for schools, so buying patterns behaviors change just on that regard, but also within Europe, there is different buying patterns and ordering patterns in terms of placing their orders on us. So that actually comes into play to help smooth that but actually it does create a different trend to what you would have seen historically on the Boxlight figures quarterly [Phonetic].

Allen Klee — Maxim Group — Analyst

That’s very helpful. Thank you.

Michael Pope — Chairman and Chief Executive Officer

Thanks, Allen. Appreciate it.

Operator

And it appears we have no further questions at this time. I will now turn the program back over to Michael Pope.

Michael Pope — Chairman and Chief Executive Officer

Thank you everyone for your support and joining us today on our fourth quarter and full year 2020 conference call. We look forward to speaking to you again in May when we report our first quarter 2021 results.

Operator

[Operator Closing Remarks]