Good day, and welcome to the Siyata Mobile second quarter 2021 financial results and corporate update conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Daniel Kim.
Good morning, everyone. Thank you for joining the Siyata Mobile second quarter 2021 conference call. Today, I'm joined by our CEO, Marc Seelenfreund, and our CFO, Gerald Bernstein, and our VP of International Sales, Glenn Kennedy. We will all be available for questions at the end of the presentation. During the course of this call, management will make express and imply 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 goal to deliver strong year-over-year revenue growth and reach profitability in the coming quarters, the belief that the worst of the pandemic is behind us, and that we will continue to see strong sales in all of our product lines and across our various markets, our future acquisition strategy, the timing of the sale of our rugged handsets to North American and European carriers, and the belief that we are better positioned today than we have ever been to be able to monetize the trends driving our industry. Such forward-looking statements and their implications involve known and unknown risks, uncertainties, and other factors that may cause actual results or performance to differ materially from those projected.
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 the Form 20-F for the year ended December 31st, 2020, filed with the Securities and Exchange Commission and Siyata Mobile Inc.'s press release that accompanies this call, particularly the cautionary statements in it. The content of this call contains time-sensitive information that is accurate only as of today. Except as required by law, Siyata Mobile Inc. disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. I would now like to turn the call over to Marc.
Thank you, Daniel. The challenges we faced due to COVID in 2020 have spilled over into 2021, with fewer of our customers with commercial vehicles upgrading their communication systems, many yellow school buses remained in their parking lots, and enterprise customers were not spending in our space due to budget constraints. Unfortunately, COVID-19 is still impacting our business and has created a volatility in orders with some of our key customers. As we witnessed in our second quarter results, our revenues declined both sequentially and year-over-year. While we are disappointed with our financial performance for the quarter, we continue to believe that we are on path for strong organic growth in the coming quarters, coupled with higher gross margins. I reiterate, our goal remains to deliver to our shareholders strong year-over-year revenue growth and to reach profitability in the coming quarters. Now we'll discuss our financial results.
Revenues for the six months of this year was $4.39 million, compared to $4.41 million in the six months ended June 30th, 2020. The similar sales compared to prior year- to- date is due mainly to a one-time merchandise return from a customer in Q2 2021 in the amount of $1.1 million. Without this return, year-over-year sales would have increased by 25% to $5.5 million. This increase relates to the increase in booster sales in the United States, specifically in the industrial marketplace, offset by the decrease of sales of rugged handsets in EMEA. For the second quarter, adjusted EBITDA was - $4.6 million versus - $500,000 in the prior year, a negative variance of $4.1 million. Net loss for the second quarter was $10.9 million, compared to net loss of $1 million in the prior year.
However, there were a number of non-cash items in the quarter, including an inventory impairment of $1.8 million, intangible impairment of $4.3 million, and goodwill impairment of $800,000. If we exclude these non-cash items, then adjusted net loss would have been $3.9 million. Subsequent to the second quarter, Siyata unveiled its next-generation rugged device, the SD7. This device is Siyata's first mission-critical push-to-talk device or MCPTT. It is an easy-to-use, PTT-only rugged device that is IP67 rated and as such, is designed to work in harsh environments. The SD7 is also Siyata's first rugged handset that we will offer in North America. As we are dealing with multiple cellular carriers to launch the SD7 on their networks, we expect to launch this unique device in North America during this quarter and then in Europe in 2022.
With this new and innovative SD7 device, Siyata expects to increase its MCPTT market not only in the first responder market, but also in utilities, transportation, hospitality, and waste management. Our booster market has been stable and growing, with sales in the U.S. market up 152% in the first six months of 2021 over the same period last year. We have multiple large-scale opportunities with first responders, federal government, and state customers, which we expect will be closing both in Q4 as well as in the following quarters, and we believe that this market will continue to grow rapidly in the coming quarters. I would like to pass the line back to Daniel Kim, who will discuss some of the industry trends and market dynamics that are benefiting our business, and then to our VP of International Sales, Glenn Kennedy, who will discuss our various sales opportunities.
Thank you, Marc. Over the last one to two years, we have experienced numerous positive trends in each of our end markets. In July of 2021, FirstNet, a dedicated cellular network for American first responders, announced it supports over 2.5 million connections with more than 17,000 subscribing agencies. This marked the sixth consecutive quarter FirstNet had reported at least 200,000 new connections and gained at least 1,000 subscribing agencies. Over the last year, FirstNet has grown its subscriber base by 1 million connections and 4,000 subscribing agencies. As the market continues to appreciate the advantage of Push-to-Talk over Cellular, or PoC, compared to Land Mobile Radio, or LMR, we believe we are well-positioned to capitalize on this trend with our innovative solutions.
As Marc discussed, the SD7 offers the benefits of POC without any of the difficulties managing the current generation of rugged smart or feature phones and is ideally suited as a perfect upgrade from LMR. Siyata's innovative product line, including the SD7, is helping to service the generational shift from LMR to POC. According to VDC Research, the LMR market is growing at 5.9% CAGR, while the POC market is growing more than double that at 13.6%. Annual POC shipments are expected to grow 42% from 1.9 million in 2008 to 2.7 million in 2023. As previously mentioned, our booster business is enjoying increased demand. This demand shift has been driven by Enterprise and other Fortune 500 companies who wish to complement connectivity with strong, consistent cellular signals. Approximately 30 million of these devices are sold globally every year, and that number is expected to roughly double by 2026.
The reason for this growth is cellular communication provides a robust, secure environment, not just for remote workers in home and in vehicles, but also for warehouse workers, the security industry, utilities, and government. Virtually any enterprise can benefit from more robust cellular connectivity. With that, I'd like to pass the line to Glenn, who will discuss the success of the recent sales trends we have been enjoying.
Thank you, Dan. Looking at our sales funnel, we continue to see strong sales potential in each of our three product categories. First, in our in-vehicle devices category, we are continuing to conduct trials with projects that have been put on hold in 2020 due to COVID-19. We have initiated new proof of concept trials with several state and local government agencies in the U.S., and in addition, we are seeing growing international demand for the UV350, including a fourth purchase order after the quarter ended from a large wireless carrier who has previously ordered from us in 2020 and is equipping additional ambulances in their Middle East country with our UV350 device. Just after Q2, we also released three press releases demonstrating three larger POs of our in-vehicle and rugged handsets totaling more than $2.5 million across first responders, a defense contractor, and a cellular distributor.
This shows continued demand for our unique solutions. Secondly, in our rugged handset product category, we have announced the SD7 device, a new, innovative, cost-effective, rugged handset that supports mission-critical Push-to-Talk, or MCPTT, to North American wireless carriers. We displayed them recently at two key industry trade shows called APCO and IWCE. The pre-launch feedback from the wireless carriers has been strong because the SD7 device is unique and exactly the kind of device that wireless carriers have been asking for to capture new customers who have been using traditional LMR or two-way radios. Our objective is to launch with a major U.S. cellular carrier and to begin selling our new SD7 rugged handset in this quarter, and then expanding our launch to additional North American and international carriers in the first half of 2022.
Thirdly, in our cellular booster product category, we saw continued demand for cellular boosters throughout the quarter and following the quarter. Just after the quarter, we signed a new leading U.S.-based online booster distributor called Silk Worldwide Inc., and they have already placed their first of what we expect will be many recurring purchase orders. We're also pursuing some very large cellular booster opportunities with both first responders, U.S. federal and state governments, all of which we hope to close in the coming months. Overall, we're very pleased with the growing acceptance by customers of our truly unique, disruptive solutions and expect, based on what we're seeing today, continued rapid adoption of all of our product categories. I will now hand the line back to Marc for closing remarks.
Thank you, Glenn. After having laid the foundation for growth, management is confident that Siyata will deliver strong growth in 2021. While the pandemic may continue to create quarter-on-quarter volatility, especially for a small company like ours, the type of business is growing and is very robust in all three of our product categories. Management is hopeful that this momentum will continue, in particular, as we leverage our expanded and refreshed product offerings, which we believe provide our customers with disruptive, innovative solutions that are all complementary. In summary, we're very proud of our exceptional seasoned sales team, who have created a strong customer base for the company with a multimillion-dollar pipeline.
We are also very excited to deliver our next-generation solutions to the market, including the SD7, which we believe will be a game-changer for Siyata, and hope to continue to capture significant new opportunities and customers, which we believe will drive sales throughout the balance of 2021 and beyond. We stand by our goal of growing our sales with a focus on reaching profitability in the coming quarters.
That concludes our formal remarks. With that, operator, kindly open the call to questions. Thank you.
We will now begin the question and answer session. To ask a question, you may press star and then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Tim Moore from CFA. Please go ahead.
Tim Moore from Zacks. The Telstra news this week was really nice to see. Congratulations on that. I've been to Australia 4x . I know how important that company is down there to get inroads with and their dominant market share. I was just wondering, maybe if we take a step back, if you can give us maybe some color on how third quarter sales magnitude might have been. Was it similar to the first quarter sales level? Any other kind of granularity you can maybe speak to, given that September is finished.
Okay. Thanks for the call. Telstra is very important to us because it also shows that even today, operators are continuing to launch and adopt UV350. This product, we can run with it for at least another, I want to say, at least one or two years. It's not something that we think is going to end of life anytime soon. We actually did an upgrade on the device so that it's now Android 10. It was Android 7 since we launched it. With that, it allows us to go and offer it to customers, and we think that it'll be a relevant device for a long period. We're very happy to be working with Telstra because, like you said, it's a big carrier, and it's a good thing for us.
Regarding Q2, Q3, and Q4 sales, of course, will be better than Q2, right? We do see a very good adoption of our products, and we said this on the call, in all three categories. Our booster business is very strong, and that's been since COVID kicked in. People are using more and more boosters because they're working from homes or they need to have their warehouses connected, and we see that that's a very strong part of our business. Our UV350, we are getting orders, but we have very large-scale orders that we've either in the middle of the trials or we finished the trials, and we're just waiting to get the orders or to get budgets or to make sure that the customers actually decide to adopt the product. We have, again, multiple trials that we've done.
Some sales that we got in Q3, some sales that we're getting in Q4. That product, like I said, it's still very relevant, and we still have a very large pipeline for that product. Our rugged handsets, until now, our rugged handsets were mainly sold in Europe and in Israel. That was the main market that we were going after. Those markets were totally dead for us last year. During COVID, they were not relevant at all. I can tell you that we did see a very significant return of customers buying those products, our rugged phones, in those markets. You're going to see that the same way that you saw it in Q1, you're going to see it in Q3 and in Q4, and going forward, because the SD7, as we mentioned before, is going to be specifically for the North American market.
That's a totally new opportunity for us. As I said, in all three categories, you're going to see that we're getting traction. I can't say if it's like Q1. It's definitely better than Q2. As I had mentioned a few times on the call, our goal is to reach profitability in the coming quarters, and we think that that's very possible. It's not a pie in the sky dream. It's something that we think that we can get to. To be able to reach profitability, we have to get to around $5.5 million in revenue on a quarterly basis, and we think that that is achievable in the coming quarters.
Good. No, that's helpful color to hear. I had a chance to catch the SD7 on the Urgent Communications webinar in August and was pretty impressed by it. I'm just wondering if you can maybe speak to either maybe what sales potential you're expecting in North America in 2022, and if there are already pilots and trials underway for Europe to kind of give you confidence on that being rolled out successfully in Europe next year.
Yeah. We have trials going on, both with multiple carriers in the U.S., leading carriers in the U.S. We are now starting trials also in Europe. I think that Europe is definitely going to follow the U.S. It'll be probably second tier. Sometime in the first half of next year, we're hopeful that we'll be able to also launch in Europe. To your question about the size of the market, we believe that this market is very large scale. Anywhere from tens of thousands of units a year to well over 100,000 units a year. That would not even be scratching the size of, or the potential of the market. That being because this is going to be the lowest cost mission-critical Push-to-Talk device on the market. There is nothing that is going to be in this price level.
The price level is around $300, I can tell you. Just to give you color, every 10,000 units is about $3 million. 100,000 units would be about $30 million. All of the carriers are very interested in what is called first responders, but not only first responders, also second-tier first responders. The second-tier first responder could be waste management, it could be yellow school buses drivers. It could be utilities, right? Those are all also considered first responders both AT&T FirstNet and Verizon and also T-Mobile, they're very interested in getting into that market. The best way to do it is with a mission-critical Push-to-Talk device. Because the device is very unique, because it's a perfect upgrade from the LMR.
If you saw on the webinar, anybody that's used a radio for the past 20 years, for them taking this new device, it's a very easy upgrade, right? You don't have to really learn anything. You push the button, you choose the channel, and that's it. In that sense, we think that it has very large-scale potential. Even in the markets that we're selling right now in Israel and in other markets in Europe, they are extremely interested in this product. We're going to be starting trial soon, and we think that it has a global appeal. We think that that's going to be a very good product for us.
No, that's very helpful to hear, and it's really good to go into the color on that. My last question is actually just a quick housekeeping question. I noticed the inventory impairment taken this quarter and a similar size one taken in the fourth quarter of last year for slow-moving product. Can you maybe just shed a little light on maybe what the inventory impairment was this quarter, and if you're pretty comfortable that you're done with all these now going forward, the impairments for inventory?
The impairment was mainly done by our accountants because they saw that we didn't have substantial sales of those devices in the quarter, some of them also not in Q1, they automatically impair it if they feel that it's not being sold aggressively enough. Okay? Because we had amortized it over a few years, they felt that it was not conservative just to leave it out there and not impair it. To your question, we don't see this happening again, not nearly this size going forward. A lot of that inventory that we believe is still sellable. We think that the fact that it was impaired doesn't mean that we're not throwing it out, it's still sellable inventory. Also on the intangibles, like I said, the UV350, we're going to be selling that going forward.
Even if we lower the intangible rate on that, we still think that we have at least another one or two years to be able to sell that product. To your question, I think that you're not going to be seeing any kind of write-offs like that in the coming quarters.
Thank you. That's it for my questions. I appreciate it.
Again, if you have a question, please press star then one. Our next question will come from Jack Vander Aarde from Maxim Group. Go ahead.
Great. Good morning, guys. Thanks for taking my questions. I'll start with a couple questions on the quarter and then ask about some of your new product and growth opportunities, which you've kind of dug into quite a bit now. I'm not sure who wants to answer this, and it's kind of already discussed, but I just want to better understand the customer return order, in greater detail. Just any more details on that customer, where they're located maybe, and what product category was returned? I didn't catch that. Thanks.
Yeah. It's a U.S. customer that had taken devices because they thought they were going to win a large-scale tender in the United States. They took it last year, and they thought that they were going to win the tender. In the end, they ended up not winning that tender, and they were not able to sell that product, and then they asked us to return it because we are still working with that customer and they're buying other products from us, and we wanted to keep that relationship with them. Therefore, we allowed them to return it. That's not something that you're going to see going forward, and it's not common at all in our business.
Again, it's a one-time thing, and it's a customer that we're actually still working with, and we think that we can sell a lot of devices through, and that's the reason that we agreed to take it back.
Okay. That makes sense. I appreciate the color there. Let me switch gears then to kind of where we're at today and maybe where you're heading in terms of the overall headcount and the sales team. Maybe this is for you, Marc, again. I think last time we spoke, or the last earnings call was around, you guys were around 25 people, something like that, for your overall headcount. Where's headcount today, and particularly where's the sales force at in headcount?
We have in our sales force, I want to say eight people altogether, and that's both sales and technical support for those sales. We have another two people that all they do is online sales. A big part of our booster business is online sales directly to consumers. We actually let go of two salespeople during the past six months, because we felt that they were not performing. We feel very good right now with our headcount. We don't think that it's too big. We don't think that it's too small. You have to understand that if a person is working with AT&T, he can't be working also with Verizon. Just AT&T will not accept somebody who's speaking both to Verizon and to AT&T.
We have a salesperson for AT&T, we have a salesperson for Verizon, we have a salesperson specifically for T-Mobile, which is a customer that we've been working very hard to get into. We have Glenn, who's on the call, who does international sales and also Canada. Right? We have two people that work in Israel and in Europe for those sales. In general, just to give you a little bit of color, we're very lean in the sense that we don't have a lot of people working on the accounts. We have one person for each account, which is the way that it has to be set up if you want to work with these large carriers. We have another two people that are doing the booster business for us.
We have two salespeople that are working on the booster accounts. That's sort of the breakdown in the sales force. Again, I think that we can ramp up sales dramatically with the current team that we have in place, both on the sales side and on the R&D side, and on the logistics side, and on the support side. We'll be able to ramp up sales and not have to ramp up our headcount.
Okay, fantastic. I appreciate the color there as well. That's helpful. I'll switch maybe gears just for a question for Glenn, because he mentioned this in the prepared remarks. Glenn, I think you mentioned you received your fourth purchase order since the quarter ended, after the second quarter ended for the UV350? Just want to get clarity on that. Is that four purchase orders after that's not included in the second quarter revenue?
Yeah. Thanks, Jack. That customer actually is a Middle East customer, and they have placed now four purchase orders at different stages, beginning in 2020. Those are a variety of different phases as they've been deploying products in ambulances throughout their country. It's encouraging from our perspective because we understand, and they're ordering hundreds at a time. It's not just small quantities. It's encouraging to us because we see that customers are adopting them and rolling them out throughout their entire organization. It's not just a one-time order, it's multiple repeat orders, and that's what we love to see.
Great. Okay. No, that is a good sign. That makes sense as well. I appreciate the clarification there too. Then maybe just one more final question. You've touched upon this quite a bit already, Marc, but, on the SD7, this seems like it could be a pretty big game changer in terms of your penetration of America, and also just your revenue growth catalyst. It sounds like the SD7 or your ruggedized hand devices haven't been sold in the U.S. at all until this point, or at least later on in this year. Will this actually represent, in your mind, a catalyst just to overall jumpstart your U.S. sales as a whole? Now you'll have the full portfolio of products, in the U.S. Just any color there, just seems like it's synergistic and could really help get the momentum going.
Absolutely. The answer to that is absolutely. It takes us from being a small niche player with a vehicle device to being a handset provider. Again, I'm not saying that we're selling a cheap device. This is a great device, and it's rugged, it's mil-spec and whatever. It's a very good device, okay? It's the least expensive device in the category, okay? It's gonna cost customers around $25 a month, including the push-to-talk, including the device, and including the SIM card, okay? That's the pricing that the operators are telling us that that's what it's gonna come out at. Think about a construction company. They don't want to give their workers necessarily an $800 Samsung device. All they want to do is be able to connect to them and speak to 50 people at the same time or 500 people at the same time.
If you can give them a $300 device instead of an $800 device, AT&T saves on what they have to subsidize. The customer doesn't have to pay as much. It's gonna be very cost-effective, and we think that we can sell a lot of them. Again, it's construction companies, it's hospitality, it's first responders, it's utilities, it's amusement parks. There's literally security companies. It's literally an endless market. For the cellular carriers, it's basically a tool to be able to take away the radios that customers are right now walking around with and put in their hand a device that's got a SIM card inside, right? In other words, that's their interest. They want to get the SIM card in the hand of these people that are right now using radios. This is gonna be the most least expensive way to do it.
For us, we've been putting a lot of focus on it, and we've been spending a lot of time on it, and we think that it's going to be a major game changer for us, and we're, obviously you can tell we're very excited.
Great. Just one more follow-up to that. It kind of relates to the first question I asked you on the sales front, or the sales team front. How are you actually going about this from a sales organization perspective? Do you have a dedicated rugged handset sales team, or does this kind of fall under a sales leader for Verizon or for each wireless carrier that you're selling multiple product categories to each carrier?
That's a great question. The person who's in charge, if you saw the webinar on the SD7, we have a guy named Jason Depew. He is in charge of the AT&T accounts, okay? He sells UV350, and now he's gonna be selling SD7, okay? His job is to train the AT&T salespeople to be able to sell it to their customers. We leverage the AT&T sales force to be able to get to their end customers so that we don't have to go to each and every customer, right? If there's a large customer that wants to do a sit down and they're gonna buy a few thousand units, then obviously he'll go with the AT&T and sit down with that customer to try to close them to take our device. Until now, he's been doing it with the UV350.
He's gonna have two products in his portfolio, okay. We have the same thing in Verizon. We have the same thing in T-Mobile. The booster guys are independent. The boosters guys sell across the market. They're not necessarily selling to carriers. They're selling to dealers, and they're selling also to carriers, but that's a different model. All they do, those two guys, all they do is they sell boosters. That's it. If an opportunity comes across that Jason hears that somebody in AT&T needs these boosters, he'll pass it over to our booster team, which is their area of expertise.
Got it. Okay, that's very helpful. Well, I appreciate the quarterly update, and we'll be in touch. Wish you guys the best going forward.
Thank you very much. I appreciate it.
This concludes our question and answer session. I'd like to turn the conference back over to Marc Seelenfreund for any closing remarks.
Thank you, Scott. Obviously, this was a disappointing quarter for us, but we think that we're gonna do much better in the coming quarters. We have an exciting product portfolio. We have multibillion-dollar customers, we think that those two assets coupled together, our customer base and our product portfolio, will allow us to grow the company dramatically in the coming quarters. As I said, our main goal is to reach profitability, we are laser-focused to get to that point. We view this as growing pains of a small company. We do believe that it's going to change and turn around very soon. Thank you very much. Anybody that would like to ask more questions after the call, you're welcome to call me or email me at any time. Thank you very much.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.