Socket Mobile (SCKT) 29 Oct 222022 Q3 Earnings call transcript

Welcome to the Socket Mobile 2022 Third Quarter Financial Results Conference Call. My name is Darrell, and I will be your operator for today's call.

Before we begin, I'd like to remind everyone that this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934 as amended. Such forward-looking statements include but are not limited to statements regarding mobile data collection and mobile data collection products, including details on timing, distribution and market acceptance of products and statements, predicting the trends, sales and market conditions and opportunities in the markets in which Socket Mobile sells its products. Such statements involve risks and uncertainties and actual results could differ materially from the results anticipated in such forward-looking statements because of a number of factors including but not limited to, the risk that manufacturer of Sockets products may be delayed or not rolled out as predicted due to technological market or financial factors, including the availability of product components and necessary working capital. acceptance opportunities market as not that anticipated. risk and may sales happen The Sockets current not partners choose risk application The that and so. distribute products doing not the distribution or successful may be to may channels The risk in markets in as not the may reports Sockets well and Sockets most as Commission. as XX-K risks Securities vertical filed and anticipated, XX-Q application happen other acceptance that of products described recent Exchange Form with

forward-looking any we being obligation note this to question-and-answer Socket statements. does such in Later At conference recorded. all any mode. session. not will are participants is undertake that this Please time, update a [Operator listen-only Instructions]. conduct

Zhao, the may begin. On Kevin Kevin the Business Chief you are Chief call call Mills. I Kevin, Executive Lynn Mills, Financial now will over with Holmes, Officer. Officer; to turn today me Dave and Chief Officer

X.X our period In Thank to X.X afternoon, us you, operator. Good from today. for and thank joining revenue decreased XXXX. for million you the QX, everyone million in same

Our in qX gross XXXX. to XX.X% compared were XX.X% margins

results. Our compared we million resulting XXXX, are QX quarter. loss to with for a expenses net disappointed these million in in of Obviously, X.X XXX,XXX X.X were the

revenue we In However, the a interpret not channel. dramatic the ahead. inventory demand or while underlying case. opportunity as distribution in by that you the is do And exciting for significantly will the our reflect results fully products QX our have reductions you that business a results assure impacted closer our the QX, were drop may our our details in sign at initially stagnating, look is not

sales our partners the believe the We to channel distribution partners customers partners true distribution were approximately our distribution our due our kept EBITDA customers. number from demand. a uncertainties, than to And positive. would are end end QX have from headwinds to XX% sales the sales number a million lower Our lower underlying was us than that reflection market but in number a X.X to that expected strong the of the and

half many Our rebalanced supply of a levels equal we distribution QX. approximately uncertain, in distribution sales of partners on one-time drawers, conditions, they first our as a times lead in as resulting of especially the QX, this be our believe been and inventory mobile which demand was and and are deliver distribution, and distribution dramatic year grew the is In solutions. printers their sale sales cash for we into and based current increased their is inventory in required revenue. to for decrease point they in years. adjustment which We recognize how into expect out will have supply

Socket experienced these an during supply has maintained difficult a issues, lead As any not six-week times. aside, time has and Mobile

As critical we XXXX stock on many position took components. in strategic a

many Square by continue. be to continue with the this and we expect Shopify leading our driven and sales Our way, partners, application trend to

made And detail. call we progress in QX, and these discuss next to like delivering on over our products Dave who significant developments turn the I'd will Dave? During Holmes, now to generation services.

couple device. a and Socket continue and paired good Today Mobile Socket development iOS in data XX reader of Bluetooth line entire of as that more ensures everyone. Thank I'd development environments and software our Mobile made the NFC major Capture the that we and both compatibility barcode with Apple the entire announced SDK across the application iOS with provide SDK, end today. data that Capture their all and strides tools we Apple support continue compatibility. the company. tools, as XX. We And product to significant performance capture our achieved partners. of best-in-class We highlight for scanners key full a to QX, market achieved writers of we line in apps QX users maximize reader in the can you, becoming their Kevin, comprehensive afternoon, journey milestones like we our

Socket SDK proud industries, into includes of scanner. helping Capture been the barcode variety software Also, XXXXs the integrated scanning cam work for create camera Socket across very mobile turns high-performance of of easy-to-use and a our team any applications has device optimal been performance has We're free base Mobile a SDK efficiency. software delivering. that Capture software now CAXX, tools into

end This partners our expertise to their with really partners to will free key resonating with development can capabilities allows Our partners scanning of is app price allow development Socket to of addition to a CAXX one all performance wider sensitive Capture CAXX sensitive now audience. our integration. to approach scanning their and SDK bring The offering users development customers. the from our serve application with much begin partners.

of in the SDK, monthly this completion journey, is by camera adding us complete will heading will a SDK, Capture make and the basis XXXX. one data working deliver camera XXXX. think free and scanning capture capture hardware which software phase piece data is team subscription now in a hard it a With scanning on the we the to enhanced through critical more company offer We to into

embracing industries technology, of meet barcode These and begin as the in to the and capabilities services models will supply continuous new chain digital and SocketScan users verification NFC real-time DSXXX. models new SXXX with within signs in of enable mobile support and scanner, identification loyalty, code new tracking. exceptional from applications opportunities SXXX customer Xd, NFC seeing loyalty The to want a positive transition QR commercial products efforts different new are SXXX Also, deployments and our resulted DURASLED Xd we're a several announced the writer to QX. and and launch our various projects. experiences Xd more and in barcode users being advance attachable get for payments contactless of barcode Our new level business of scanning companion to QR our emoney ticketing developers code the DXXX We scanner, of like scanning. announced initial providing who follow-on for innovate DuraScan needs reader transparency versatility linear resulting Xd ahead readers by

gives NFC to accept universal mobile code app with QR wallet device. flexibility reader Our SXXX, one and the new a multiple formats partners SocketScan

all of to With not of provides our the states myriad SXXX the can about standard positive read well. following implement as technology. and mobile peace can worry for have there. is countries. seeing ISO partners one adopted with XXXXX-X MDL device that mind credentials driver's We're types in choosing and or credential SXXX out signs being license they around. This the The wrong most

With a opportunity We for ID results. ID We I'll diverse their of Lynn, can set Lynn? a space. and it larger We Socket and MDL that, continue and that financial details scanning application products our new reach digital big Mobile. over for end create more on turn invest feel cameras the to and and in to more our providers users. digital

you the the quarter, partners of channel revenue decreased continuing XX% sequentially and component and X% today's decrease outstanding over driven our decreasing gross $X.X overhead to distribution net costs, our freight repurchased the income XX% year's preceding in The sequentially to invest production repaid QX, our critical third in manufacturing the of quarter. quarter was This gross volume. our million. invested XX% prior QX a a to as end reported was projects. balance. while window. quarter, are and operating of well of compared preceding recorded from at margin cash million, lower and over the was persistent during and million $XXX,XXX end compared QX or and $X.X expenditure, the open The million. QX, X.XX% of in the in revenue reported program inventory the revenue, company call. purchase million managed share $X.XX net to loan compared prior prior in XX% $X.X end the our of distribution quarter. Thanks, affected to year sales share the to $XXX,XXX increased for Dave. expensive million, weaker XXXX. in the joining is will In capital but quarter, QX, continue the even buyback we shares $X.X reduction of In prior XX,XXX of to with expenses combined Thank decreased the by balance quarter. $X.X tightly demand The shares to quarter, million, XX% year for of $X.X versus share, In the everyone margin year though per $X.XX $XXX,XXX $XXX,XXX are in $XXX,XXX QX users executing across we the compared user per to as higher for allocation The $XXX,XXX $X.X We the or a net loss in the to preceding X% income cost

us and XX, our chain was reserve compared XXXX. XX, serve inventory end on A level navigate customers. million, better our June the $X.X and million inventory off As to the of to million supply September sufficient enables at of $X.X $X.X at net disruptions

We inventory our sheet inventory continue the remarks. meet our the We environment. expect believe and of to balance lower year. the managing position prepared be to at wraps continue level a the liquidity current a and healthy in This up end

Now the for to I'll hand operator the call over questions.

Go question Instructions] Sakai a ahead, [Operator And from we Chris. Singular have from Research. do Chris

question get I Hi, were on drivers I quite margin there? the had decline. main yes. a the just Hi, gross that. What didn't

Hi, quarter driver is the to the loan preceding main Chris. compared QX, the volumes. Yes,

-- XXXk the loan the over overhead across level volume. is around was manufacturing Our that and the allocated

inventory levels are your are your any you inventory concerned concerned, And of as Okay. far then, going as about obsolete?

do any no. quarter analysis auditors reviewed the and if that for each at part end components we by and considered through of every go No, sufficient obsolete. have reserve is We and obsolete excess our quarter

And revenue, Okay. that. how of future Thanks This we on thinking should environment? sort for be of margins, future then, idea any

Hi, is Chris. Kevin. This

we as distribution see we levels. to rate. change the in the don't run think view I And that, expect a substantial X.X

be And the QX, is QX. would a I and in in the say that EBITDA stronger would believe will we're equal. at even back we still that ins should though I positive little say struggling. we'll the So comfortable, be levels outs bit We be market

Okay. Thanks that. for

Fargo. comes question from ahead, from next Harrington Go our John And John. Wells

of company I what going your levels? is looking is like friends That exactly and quarter the don't XXXX? again, much my QX even how will that million about fourth understand have quarter that are level? and also is funds fund? be has three now what those to does the reserved Is buyback any third what know you questions. X.X posted feel? happened? to versus what to that for good Question a And buyback. we're money reiterate the left we Those compare shareholders Could But at in And the the the

the entered QX this we approved Board share buyback a back year. And XXbX-X plan. Our program, in

May April, $X.X those our outstanding shares. way Board and the of in four X.X% timeframe. a has we the buyback so have purchased and continue as the in million outstanding approved shares, quarters was decided their the And timeframe Board across And program. out spread X.XX% again August executing to July, And

we've the resumed during So window. the open buyback

program just to program. one-year to buyback it expire set a maybe And was a is add

So up current X.XX% of at expires program the authorization was The to XXXX. quarter. the in given may to four in put of March XXXX. will X.X million to quarters it maximum over the extend in decide not -- end March new any to program, Board the And XX, exceed buy expire our a but

you. Thank Okay.

[Operator no it this final questions the turn comments. back time. we Instructions] speakers And at have I'll more for to

operator. you, Thank

for like to all thank Socket Thank afternoon. Mobile a we today's good call their in just you for in you. and wish we participating So interest everyone

webcast. You participating This today's for concludes you may the now Thank exit presentation.