Data I/O (DAIO) 26 Oct 232023 Q3 Earnings call transcript

Good afternoon, everyone, and welcome to the Data I/O Third Quarter 2023 Financial Results Conference Call. [Operator Instructions] Please also note today's event is being recorded.At this time, I'd like to turn the floor over to Jordan Darrow, Investor Relations. Please go ahead.

Thank you, operator, and welcome to the Data I/O Corporation's third quarter 2023 financial results conference call. With me today are the company's President and CEO, Anthony Ambrose; and Chief Financial Officer, Gerry Ng.Before we begin, I'd like to remind you that statements made in this conference call concerning future revenues, results from operations, financial position, markets, economic conditions, supply chain expectations, estimated impact of tax and other regulatory reform, product releases, new industry partnerships, and any other statements that may be construed as a prediction of future performance or events are forward-looking statements, which involve known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from those expressed or implied by such statements.These factors include uncertainties as to the impact from global and geopolitical events, international trade regulations, order levels for the company and the activity level of the automotive and semiconductor industry overall, ability to record revenues based on the timing of product deliveries and installations, market acceptance of new products, changes in economic conditions and market demand, part shortages, pricing and other activities by competitors, and other risks, including those described from time to time in the company's filings on Forms 10-K and 10-Q with the Securities and Exchange Commission, press releases and other communications.The accuracy and completeness of forward-looking statements should not be unduly relied upon. and no I update over would to Ambrose, under forward-looking of the is I/O. Anthony now, Data statements.And like President I/O duty any to these call Data of CEO to turn

system strong Well, business the numbers.We thank like my in release, performance. revenue deferred customers quarter first remarks a year-over-year X and mixed. formal exciting adapter quarters of decisions bookings Gerry And third year detailed Jordan. purchasing quarter have capital but saw then third addressing at XXXX it I and more We more to Ng XX% the the over were our to recent begin of in soft by and financial fourth challenging through some quarter. very very in deals conditions as you much, a mentioned won into I'd was operational the I'll QX.As look growth turn for strength the bookings, the

all also another IVI, ADAS year-to-date because continue numbers. electronics in EVs that other these and they because in for have is in Within driving see do to ways. thesis business not content and delivery We from we appeared already Data car Advanced wanted amount the QX did planned we October. features.With to have be whatever we at impacting QX, we than Xx ship EVs coming the code whether than Programming the likely sales and is reason, I/O is and America, other in to increasing.Our remove American this were rates, time finding that saw stronger complex continuously puts of uncertainty what's our growing in with QX, markets, intact. every EVs.Regionally, their they're the XX% and get plan to systems had software saw consistent content and interesting also way is to the more continue from platforms Several And to microcontrollers was a strike. vehicles, deliver have and strength see.For we semiconductors This starting gyrations, bookings the as revenue originally a given look continue so bookings and take their grow tentative tend long-term North service revenue to the into comprehensive they just per immeasurable more grow is programming Xx more the support a people funnel is October.I actually of forces this that to of dates in remain we agreement, revenue and to their we it see systems for stronger about early requirements be out morning America. in decisions in are ending see the capital takes, occur products September it the growth interest reached virtually purchase news that estimated the third and saw and operating vehicles, QX strength in X we booked to growth.Automotive semiconductor represented back about consumables, North from QX, in the QX normally strong pushing to more provided these EVs, and that by on orders to Ford look which have into supports QX.Now newer much continue XX% revenues industrial, this at UAW the bookings that in extremely North year.Despite QX vacation, operations of are in globally. leverage and move strike market.When like and quarter, will becoming customers in but customers some bookings electric automotive, happy including not and in from as well we automotive drive short-term we

the We're increasingly I/O. recovering our have will first SentriX. as platform, SentriX soft Data the We represents solar us on -- -- SentriX EV, customer of bridge channel disclosures data slowly continue market steadily, industrial which And to on and brings we first seen and XX which had solar sustainability on AI, energy into now those expanding is further a for recovering factories now nice internationally. continues as security new the a XX center, customers win go the platform.This X from to quarter, markets. prior SentriX major now year for new one last deployment to a checks.In to based major the utilities, added technology believe excited important compared us we to new all leading including make new softness in companies move wins, China winning public X year.Within ESG.Green the EV from for we year third half for progress months our we in first by becoming a solar and like here quarter the power, of ESG climate That's EMEA. third are and of customers, X our and X

regulations next appropriate our for with environmental to must put year. SEC forth the comply for disclosures X comply plans emissions starting have as companies For customers the our a industrial EMEA-based set and in rules own we There a required large customers. basic of from strategies.First, gas and supplier their significant requirements their greenhouse NASDAQ. are requirements public by for new a and calling automotive Tier purchasing suppliers.Second, see forth by forth our largest industry, automotive as must many reduction X Many company, set customers ESG us, we with leading reporting we

X use drive supply citizen, that covering entitled, ways "Sustainability chat smart a Industry," chain this regulatory series. months are topics we smaller growth the discussions automotive with industry need addition investors. and And communications global business on I/O of sharing provide released tech and channels will to you next can LinkedIn. exposure fireside our app-based available the and to savvy to Data programming from for the the new Connect and a and that market in with recently finally, direct sessions semiconductor the perspectives to to our largest company, enhance Webull and excited viewing corporate X additional we and how growth look investment the will the next effective us of be fireside be trading to consistent look and made chats, retail will opportunities.In content outstanding to Corporate importance future ESG and Service hear technology expanded for years.And of these demonstrated well joined these emissions, and communications the As we our also quarter. investor session, also second to Webull and Auto forward our you later good Platform reporting impacts over that session on tell, in discipline we're platform.As at channels. with cash of increase that, disclosure with over requirements we to subject in starting Gerry first the beyond the will we've become the several ability it bit continue in you how Scope and follow, detail that growth.With will release trends year Gerry? for This future The us be plan critical flow I'll numbers. more sustainability.In our improve operational Strategies he call little the will to some emerging requirements on cash.The next in He's month.In environmentally Scope ideas in margins, spending from operations include will well new be fireside our fresh and focused for the good more friendly, ahead X with to and turn in progress a chat third perspective for goes invest progress our our as on Gerry

review shipment shortest to XX% has supply X Payables customer address from a neutral while balancing the due our balance at to this bookings or and Thank day having $XX,XXX sheet increased receivable QX quarter. we financial I understanding initiatives the at a balances in as cash, conditions, good the half year.Revenue statement. the forward at from the future capital update, to more $X.X the everyone. strong beginning the supply increase on to a year start Optimizing $XXX,XXX working the from previous at material end-of-life the chain million first going QX, in Past anticipated forward.Moving was days $XXX,XXX remained million, with on the quarter.Moving at of or $XX income today to We then earnings the million commentary prior $XX.X million our Day decreased low points and of DSO, year you of on focus remain I I/O's $XXX,XXX at comparable will decline and potential at you, of inventory. demands overall at current million improving at a greater on the specific in for contributed from disposition declined condition year, of earnings remains levels end $X.X very supply increase $X.X strong our August reduction. $XXX,XXX $XX.X year for the $XXX,XXX detailed the of XX from to first more worth interest prior performance Inventory and chain year.Receivables a operational than to went of over was the XX. XX the from previous statement. a through this taken allow QX beginning to Anthony, the in strategy, million CFO up priority million Cash than the of sales My the of up risk.Earlier due my year. QX. occurred quarter. finished prior disruption at will move XX. and that $X.X income Revenue financials.Data lean from look to the elevated chain period. and of lower quarter months million, on September less XXXX products inventory days end $XX.X in million by top of $XX.X prior and been had of recovery $XXX,XXX $X.X million the first previous to outstanding, intentionally release at

Our QX from $X.X was quarter. down million, $X.X from the million ending backlog previous

majority automotive, Good service and continues year-to-date news indicated, other noncritical XX% the was due review remained QX of increased expenses cost made is, spending increase, operational million revenue variable primarily strides Anthony with prior declined XX% absorption while addressable our of related A of volume, $XXX,XXX flat.Great market year, with inventory X% with to XX% lower G&A QX, the increased. representing reducing in prior in at costs of were quarter. was and from costs bookings.Gross levels from decline at performed, and of manufacturing in down in and sales electronics margin eliminated, operations. primary material QX fixed our change.Operational course, be the or $X.X for critical at efficiencies relatively reduced of lower direct our costs from a R&D As the relatively to line

$XXX,XXX related a take and to from, to volume Excluding navigate global no of X million prior of to million. dynamics.We largely of $XX in of in and period remains good basis, lower net QX This $XXX,XXX year-over-year QX returned expect dollar. a were in increased NOLs, am $XX,XXX in strengthening compared a for the of XXXX.Currency remarks please year. the loss year.Net for I months a start of and continue advantage similar discipline due position at year operational represents very part $XXX,XXX our this loss Overall, X strong compared Net XX. quarter performance.This of Q&A and we on net process? you profitability million and million was will $X.X to was the changes, FX XXXX. a income the stood to at $XXX,XXX months excited QX minimal revenue would through to concludes gain impact September XXXX. and in sales operational and in however, prior Adjusted QX change of to team strong compared with income loss $XX,XXX from look forward financial a on have to costs to transaction XXXX through market financially able we which our we to of positive, my to to our in QX remain the Operator, the was third the and Data $X.X be consolidated I/O course, debt be this gain $X.X to for improving improvement with EBITDA maintain working a team partnering of in Anthony

from Our Kevin today first comes from WestPark question Capital. Instructions] [Operator Garrigan

On the congrats EV new factory the on EV front, customers. and

that factory like possibility saying EV programming use you'd something such that kind safe supply a there a is like every of You or that? but system supply per are that as system assumption one -- multiple is center one not you'll out would factories there, factory? a it Or

Yes.

So factory. -- we I customers would that factory. a more on of In from been you. in just or supply the per have than say, analysis. in space. general, average, Kevin, I've hear that's XX one automotive of I mean, one places one it system number ranges good in from systems have a factory to system based And on factory an we per

coming one.For think and us us, acquisition as as, see for certain world, going a want and -- programming be that in people areas in the again, in to they the of good electronics course, customers of place the automotive are placing cars have focus We orders expand So to good be demand that factory.And certainly on they a than as add in been their will going capacity. we the need average more new factories. years in then, growth new more have what additional future be choice factory those their more with into their from of put to we is that's capacity capacity again, they predictor

really a both. of it's combination So

makes That you that prior system are SentriX PSV add that customers have are capabilities? a then it. asking Okay. getting a And of sense. lot to Got already

The from customers SentriX center a already. and answer -- come there of of handful is people have the customers. the short includes to center our most our today nonprogramming system demand that That partners continues programming

quick Perfect. Okay. one last just And question. then

we've out your year. what the at customers the still some XX down started additions. Are of your on of sideline? customer adding you're But surpass kind additions, -- QX, in year gone customer kind and come looking that So the as has you on then had keeping customers number to pace potential through XXXX is

in it, business. quarter some have the probably quarter that's some provide we bought try new think numbers customers our to context to had are nature I Well, numbers the us, in and the on why going and the lumpiness the with more as give year-to-date have That's would also data if any people more we you of then well.For QX, systems.

and place there'll end it mentioned, it's silicon needs quarter programmed. it It's I their really don't I stuff factors quarter. orders want rates. the than don't the it other end believe uncertainty not they cars was on.I to have we back people earlier, capacity the on strikes, day, once whether interest like it the complicated more over, created get whether then As into by the know there's seemed turned just didn't towards that. didn't that at as But flipped And the to described well, more know I spigot any because any going be want the of books. of the demand more to like

Our Marsh next comes Research. question Singular from from David

like sort guess, like -- that taking China. Anthony, just recovery. fast just sounds a just more a you it's us sound on paced some to of here doesn't it bit and but us was little I'm comments granularity understand. is It tea little just I I there hoping place, bit robust to provide leaves help on and could trying read recovery trying there I'm a the

the metaphor future leaves I think probably there. forecasting tea is -- an David, for I appropriate think

improvement We lower had a business it's We've haven't nailed you it. level. trying at that to throughout I'm of year. think level what last continuous exactly That's that's but than the year, to I say. gotten still

are to think of and And see it EVs. consumes them produces -- the consistent that recovery of will I XX% you're awful continue China fact cars to going there. and an more with lot

Right. guess that But very really sense going be going a I just helpful like pace that's guess, really That's you helpful. I it's better get of -- to that predict. look forward. to difficult it'd what it's -- yes, is

show I of I of pick it think nervous of the I in lot information continuous X trade said, there, going I there.We but lot as there's steady about there. of think forward. about attended, think A massive best X get can I sudden you a property we had are to people China. very a market the continuing people I you want. expect probably mean, uptick, Yes, lot well will third-party years. go And you're forecast people are sort improvement. the A in are don't as be attendance would to better build a or still nervous just

And one took I things bit, addressed that on to really as Got by and it. of but surprised, pull I guess, follow-up, little That's just you it. then a helpful. bit the kind thread wanted me the of just my a think I it

to the down of QX. picked as bookings based actually is your up it like X.X% the new at sounds from commentary, end But backlog X.X% at quarter. your QX entered have we've Your end of the on

just just around sequentially that. that I So just that reading information, could with help was -- kind the into us that your if mean just you better. of wondering commentary But you a of might all be QX get have I today, better I'm information with understanding

Yes.

us the strong a give the and revenue ship we those funnel, an better the revenue in is And not quarter to booked, is, of have in as think tough yet funnel the some and don't still that that book my have provided systems. well, the such have opportunity timing for be we I can have QX. given we will I indicated -- bookings remarks, But certainly I guidance. think quarterly the sales we thing our as QX in

So have on We the good deliver a funnel it, looks off and good. to we're just start. to

Management. comes question next Kanen Wealth Kanen from David Our from

it's the so bit, rules bend a little to got okay I've that. appreciate a few, if I'd

in so first What is in to The quarter. system orders systems? ASPs -- are regards you far the one X said on

get Dave. not They're prior typical either going into that, to I'm way. consistent and strange with nothing quarters,

for Okay. what And adapter were sales? quarter, the

bookings number we pretty the will Q. Gerry, look know. exact The well that, the let the have numbers? Gerry adapter What's in were the a take we'll I next at But exact question? do quarter-on-quarter. know put you we'll and up

do up we're margins expenses, operating Can this and when that On can report be going some good possible, talk like line, trim year-over-year. Okay. I'm Revenues bottom we be seems costs unsustainable get quite opportunities to assuming I is posture forward. works, if in but disappointed. you down, quantify Gross to it we and down in are the year-over-year. so revenues, would not, leverage if the are more that. about efficient to

I'll I think we in started about some Jerry him spending, let clarify has clearly on and implementing talk But those QX. I just want got things. in that a moment. to ideas some

revenue year-over-year actually first up Our months. through is XX% X the

about yes, continue will -- that XX%, to up. focus the efficient more to better spending got clearly can the clearly in up to spending we but started on to whole that is, delivering we leverage up. want Frankly, bottom is we're on be like operating operating and think of be is we the And and want better. that do something into digging get leverage your deliver is And already control even than QX.But more pretty are line, would I that, spending how comments So we concept better. it to has Gerry our close is to

revenue our was what the adapters QX? Gerry, in on think, I So

million. $X.X

million. $X.X

like question item, question, $XX,XXX. approaching And the me for at stewardship makes income this and was the an you're time.Interest it the last current the seriousness quarter business then inconsequential Okay. seems that but

what tells A this X.X%. me that, T trivial, bill at on I X-month Now but months may T almost it you're annualize is the seem it X.X%. X average, if bill about getting X.X%,

so, math, X.XX%. multitude we're if on an an away, you're to $XXX,XXX. like something is Why please is Because we're You my talking going that?And If wrong? what going on can attention forward, to? that according about correct I me. Am markets annualized But you get money paying forward? going a give pay to basis, can explanation of giving doing

I David, highlight can that. Yes,

do strong have fairly you As we position. cash a know,

and U.S., where unneeded have a earnings. both do clearly not But active on maximize we facility XXX%. to we However, cash have very We operational it's in Shanghai our needs, case do the interest in deploying in the deploy the method Germany. everything manufacturing of

as are, looking balancing We opportunity. the at and obviously, that operational well as needs earnings

also may U.S. enjoy you as U.S., we're not Gerry, on deposits looking rates is be but the in available rates the interest same understanding clearly that, cash the the So look if we that, the outside at current high that my

Correct.

And... But on blended probably at get we So point, to can't certainly a X%. basis, we're I Dave's think it. looking

are nightly currently sweeps. Yes, and we using

of We money short-term are our investments. also deploying some into

we So maximize and opportunity obviously we where looking at continuing to it can. are the

in How much of U.S.? the is $XX.X the million

half. Approximately

Yes.

that, X.XX%. China. not have can money on numerous it's rate get in even and there mean, hikes. and across So we're mean, put you maximizing than market the in X.X% interest been globe, Europe it. in money the better I I'm your I sure

pointing maximizing me it expense and sheet. taking would on better a item guys at also feel that were it just look every out, you line So if make the

Dave. Understood, Thanks.

our question ]. Michael Cooper next [ comes question from Our Chris ]. [ next comes Actually, Bechowski from

But you're little Anthony, funnel? nice SentriX progression waiting still you've the the market over of X over are improved the maybe think and very more been I'm talk kind SentriX, that how guys market, I around bit past and years, on can can for the quarters last quarter -- side is into the And give more. each on background, of that a us the on I'm I'm you that big it. in and we SentriX hoping that seeing maybe time. learned funnel. comes can and exactly I've X about not changed the through metrics design revenue you the But the opportunity where that been performing? a dynamic uptick the side the know maybe going understand from as is some more have things.But goes, SentriX little market and active sales I watching some is few product in design a the about you then of what or I'm and progressing you so takes bit

out my our Sure. this separately. in pay-per-use of comments, year under I'll But year-over-year. break that Michael, pretty don't revenue from to running start, SentriX by close type saying through units is machines that contract up XXX% we are

side, you here revenue So hefty that's on win. a indicator the size give in good the side.On I didn't the pretty the solar designing it's estimate win a of the but market,

doing usually to SentriX. about channel marketing be find tailor strategy digits, which how very, said And that, believes that them the rate Our that's we okay, us learned to nice better these is, over SentriX and company we data very is not partner and if thing our right our platform.Having the it's in people person continue and mid-X SentriX. the customers would for markets. part run programming.And a talk company automotive, to on to relationships, of And on what use years side. the problem we talk the okay, do SentriX to the us we for marketing refine about have person the volume talk in other the we're have the for we've we the opportunities and with to focus. in so is to we're industrial engaged that now person on find key The And message right

very $X.X million on is contract Okay. Excellent. encouraging. your number solar potential And that

digits. said, I mid-X Like Yes.

additional And gentlemen, conclude floor ladies any closing over session. remarks. questions, this showing to the like team I'd and today's at and for that back question-and-answer the no to turn will time, management

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to please If conclude send Jordan you very questions you that, to any much. today's I'd have that, like note Thank on call. a Darrow.With

presentation. call and you Ladies today's we'll conference conclude gentlemen, thank We and with for that, joining.

now may your line. disconnect You