Socket Mobile (SCKT) 22 Feb 232022 Q4 Earnings call transcript

Welcome to the Fourth Quarter and Full Year 2022 Financial Results for Socket Mobile. 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, the risk that market acceptance and sales opportunities may not happen as anticipated, the risk that Sockets application partners and current distribution channels may choose not to distribute the products or may not be successful doing so, the risk that acceptance of Sockets products in vertical application markets may not happen as anticipated, as well as other risks described in Socket's most recent Form 10-K and 10-Q reports filed with the Securities and Exchange Commission.

any update undertake statements. such not does obligation any to forward-looking Socket

note is this in question-and-answer conduct Please are all session. this mode. Instructions] At participants will listen-only time, recorded. being Later we [Operator that conference a

Kevin On Officer; Chief and Zhao, Dave today Officer. Officer Executive Chief Business Mills, Financial the Chief me call Lynn with are Holmes,

will begin. may now Kevin, Mills. you turn I the Kevin call over to

both with XXXX you operator. QX, for and joining a Good review I'll today. you, QX. of Thank with thank begin and starting afternoon, us everyone

in Our million XX% QX increase revenue decrease XXXX. compared was $X.X of $X.X in reported million, to a the XXXX $X.X QX the XX% a and QX compared to million

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

operating QX $XXX,XXX operating of compared we was In $XXX,XXX operating compared QX XXXX in an In QX, QX of XXXX. to income million and of QX and recorded XXXX. EBITDA of an loss QX of of loss an in XXXX $XXX,XXX in a $XXX,XXX $X.X in to $XXX,XXX loss

our our me, for XXXX, compared $XX.X decrease in full results -- XXXX X%. was $XX.X XXXX, of year to million revenue excuse million, a at was our Looking for revenue

compared XX.X% gross margins XXXX, being with reduction by XX.X% Our were supply to in driven difficulties.

credits. earnings in compared Our million was from XXXX, $X.X share to share of $X.X XXXX, operating in for $X.XX per diluted tax operating per an $X.X to years XXXX. $XXX,XXX loss compared diluted and million, million benefited our XXXX was of income to $X.XX income in was earnings XXXX. In both compared EBITDA

distributors months over-purchased XXXX during resellers rebalance We supply reduce purchases the they their saw availability due the concerns. half inventories. we as challenging distributors their Overall, XXXX first very a year. saw resellers XXXX, was strong of a to second In and and as and and demand of six strange

report as revenue sales revenue, distribution made our lumpy. Mobile very XXXX Socket into which

demand. out the sales distribution to of actual gauge also We measure

half over little first XXXX, of distribution a of little they the were $XX In under or as million, half, of $XX million. out sales second

year being first half So remained stronger solid the throughout the half. demand than with second the slightly

model partners. from not we sales generated XXXX, difficult near-term impact remain saw is application these sales our by even demand Our enable uncertain us does In application as and in application-driven business to times. demand reasonable

new areas, XXXX, on will During growth. long our Mobile, discuss term minutes. significant to metric, solutions positive Holmes will in Socket for feel made this focus very Mobile which against was enable Dave and developing Socket as that products was we in a several I few a year progress XXXX achieve

As regards and the year, outlook think for the first remain half the key inflation the remain market will in especially uncertainty concerns. of XXXX, I conditions challenging, as

we expect term. we continue headwinds the to in short face So some

to to as be people in stores a However, sale are of we return their good stores, are of do that would Socket see with of device. which now required wanting Mobile, shopping; physical stores many point for the especially, scanners as physical online are as needed there using primary trend Ipads physical more

call over for Dave? his the to turn I'll David said, that With Holmes come.

I'd our access and portfolio. toolset SDK One is supports integration app improved we as good partners provider solutions. comprehensive capture in achieved becoming to that data capture will We a continue you, our Today, that development Capture of our milestones afternoon, more and Kevin, like key we a company. data significantly Thank SDK, the Socket highlight of Mobile XXXX, everyone. journey couple all entire unified software to data our Capture capture

Swift project. developers, Package package Manager, create using apps for We open-source single a Xamarin managing also by environment MAUI, our expanded an for .NET native to We solution support. a framework created now replacement development multi-platform support and Flutter, iOS’ Google,

that includes users. with Capture all multiple is One of their camera App typically last to scanning end software. base the support most SDK of important to providers integrate made now parties year achievements had we

Socket Now with we support with needs. one integration can their Mobile, all of

the best-in-class and camera added CAXX, our we continue base XXXX, deliver capture scanning software performance For our Socket cam experience, to in portfolio. hardware ultimate scanners to product a data

The CAXX the have end profiles is it and scanning version in providers app of Capture and included variety SDK free end support. to users of App enables provide their requirements. latest users our with a

Socket the users who ultimate high Mobile only end need traditionally addressed has the performance.

well. segment gorgeous scanners have barcode Our served this

the have in space. commanding We a market share

needs. benefits and investment a capabilities app-in user-friendly capabilities low The the without users experience or have daily enables hardware. scanning to This This large barcode door ideal In of requiring their for scanning to QR end option other new scanning an purchase having scanner. we into to test for also cam are allows is without with capture of opened leverage physical users Socket and the out free to any need users volume barcode end data barcode tiers to expertise. XXXX, have users CAXX, who Mobile's scanning, simply scanning Socket code initial additional

free enhanced hardware App in providers scanning. that camera can camera Capture of integrate the XXXX, latest this and scanners, scanning will SDK version support also enable

technology be basis on stream available Our a revenue will recurring and for Socket for subscription a Mobile establish software advanced it CXXX will sales.

user's scanner SDK. change a with end the supported since code to free hardware to have The unified can not seamlessly, will providers from change. are all as users end their needs app upgrade same to subscription, The their Capture

in team capture new is we Our data a this the delivering these software a has in XXXX. more excellent capabilities, journey. believe We'll hardware in SDK job capture this make complete an and step data critical company done and

we scanning, technology. with emoney SXXX for ticketing, contactless finalist deployments Award and and commercial Outside NFC reader writer and business embracing loyalty seeing resulting mobile the competitive Initial applications begin NFC developers of of are is SXXX outperforming NFC as customer Form was solutions head-to-head our The Innovation competitions. experiences for exceptional in a follow-on more and chosen our as projects. our positive signs camera are

spent that we meet and ensuring XXXX, to time prepared opportunity. excited digital opportunity are continue to the that We be the is in about ID presenting we

addition enable like support we app to also launched mobile In mobile centric to digital driver's wallet opportunities the launching to leader and health license NFC a universal partners and code SXXX, SXXX, cards. care QR Ewallet

partners Our app to SXXX provides. multiple formats one their the technology that love with flexibility accept device development

there, and can being standard following in for worry This countries. MDL of space. With a most or SXXX seeing digital their with around mobile ID XXXXX-X. partners continue to states device We're ISO types is in credential the invest and all credentials MDL license driver's technology. we in signs wrong of SXXX choosing positive and also can adopted myriad one out provides implement to the they a that not piece have read mind about

more feel set create end We reach of their for Socket providers and new and Mobile. application digital camera scanning our can large ID and We a users. products diverse opportunities

that, financial I'll it to for With turn over results. on details Lynn our more

been term afternoon, Thank year-over-year with to financial $XX.X were Gross XXXX today's XXXX joining XXXX. compared full growth. decreased in year versus XXX.X% million challenging for has a Good in in everyone. headwinds Dave. for business fuel macroeconomic $XX.X to affecting $XX.X our million X% long of call. we you expenses you, Thank year XXXX was to as results. invest Revenue the to in margin XXXX. continue XX% to XX.X% increased million to million, $X.X compared Operating

the XXXX tax in to XXX Section XXXX. expensing in R&D Instead, income of the Acts it of deferred included and to share eliminates company XXX cost benefit, income the adoption an of the primarily and share income our which beginning expenditures, year, and benefit in $X.XX the XXXX. per Tax per of resulting $X.XX related net of of the $X.XX per $X.XX earnings tax tax diluted assets to tax share capitalize benefit. earnings Cuts XXXX, R&D Section of requires the share in diluted a Job per included compared prior increase amortize

Adjusted compared margin EBITDA $X.X for compared $X.X EBITDA to XXXX. in Adjusted was XXXX. was for in XXXX XX.X% X.X%, XXXX to million million

$X.X decreased compared to revenue XXXX. million QX to $X.X compared year's to prior in to million QX $X.X the quarter, in increase the million Our sequentially is but XX% XX%

driven volumes The the improved significant gross cost. higher gross costs compared X.X% production the QX operating and the million, to over X.X% points, prior in manufacturing $X.X by QX basis was QX increased and primarily expenses sequentially quarter. improved inflation of XX.X% quarter were year's overhead XX.X% due Compared year's allocation prior in to margin persistent gross QX. our margin margin to in decrease however, was XXX quarter. the over to across component preceding their

per -- in adoption $X.XX to and share per the earnings per $X.XX prior Job of to Compared net diluted of per the benefit related diluted quarter, the share included Cuts share year XXXX. share a prior ago, of Acts the income earnings $X.XX XXX QX year tax the of of Sections loss $X.XX the Tax of in a

in $XXX,XXX ended for million. with we QX, of sheet, XX,XXX expenditure, capital In the shares repurchased balance. of invested loan balance we to Turning cash repaid and balance our $XXX,XXX a $X.X year $XXX,XXX

full XXXX. year XXXX, of paid off the in and shares the expenditure, capital loan invested The repurchased For of for $XXX,XXX remaining $X.X was of balance. $XXX,XXX balance the $XXX,XXX at repaid XXX,XXX of loan end we January

December managed maintaining partners. net of levels our to As was XXXX, our reserve, $X.X XX, of inventory inventory our ago. $X.X level, our year to delivery while commitment We on-time a million million compared

our This wraps up prepared remarks.

call hand for Now the I the will questions. to operator over

have Singular [Operator Sakai Chris question from a we from Instructions] And Research.

in And how X% of see do about XXXX? this Can playing in you you Is the this jump out talk margin? sustainable? gross

Yes.

the margin, improved had overhead we gross volume to fixed expenses. more on So the we because cover margin gross

less. So we shipped obviously, QX, in

components also for by components components. concerns pay We of due number to and availability. had margin shortages would XXXX -- over of our for bought a of cost gross a I number the, We of the say, had in premium impacted been

is feel points, above that Obviously, model anomalous overhead and have to small we shipping that we is maybe feel based we on more QX that But on due that. and is in forward and absorb shipping sustainable points, a slightly small sustainable quarter, we really XX XX, the the low really then term, going margin have XX volume. was XX-plus gross if business long to number. around the points, So

looking? Okay. improving? Then your can supply you is comment on chain it how Is

we of great first supply really have of all, a deal problems. Well, didn't

issues I took think we sooner sure panicked we partners. an that our supply make to most, probably the little impact didn't and than that position bit inventory a

were we many against maintain partners XXXX, a X-week appreciated. our and throughout So time, lead which to of deliver able

substantially at sheet, our look did balance if You'll rise our XXXX. you inventory from see,

in that was our to no the around several inventory and increased by Today, level. million So is inventory million $X impact. make dollars 'XX we 'XX, there sure

plan that. Our to to is start reduce

problem, on I has woods would better. all really it's situation solve components completely say you availability components. significantly stabilized, as certain the before not supply but is there the yet, The But good is now the improved, out and at we're you least need of situation

from it it reduce Okay. million where then to we $X And about you inventory, could you say say in expect you level. talking XXXX? About plan would

would we of I Well, don't the you to that more the million of much availability Certainly, hope it higher down year. end like supply, would inventory. to with as carry need by $X get

times that. lead be to our start inventory to as we more with So will basically line fall, in reduce

say the would $X is situation this if as continues reasonable I towards to expect. So million supply the of end we year improve

Is how last And it me, you operating XXXX? as would it -- growth for be Okay. see do from inflation? then expenses mainly in

we I there XXXX. to increase which more mean have Yes. pressure done obviously, in is salaries,

some in where we more operating costs. we continue to feel And So to increase hire add will we also resources. we to see need areas select pressure

that's salary growth moderate think think in increases, primarily I by inflation-related this yes, I So year, driven reasonable. expenses

[Operator we Petronas Instructions] Frank a And from Prudential. have from [ph] question

I have question. double-edged a probably

extended May, you not, how million is, set have of writing how been question be ends have the came an shares To I $X.X to there has out in you of a been up? think I But period? date? buyback million. I will you And XXX,XXX. many bought the and my too number $X.X On fast. the date, used know could aside buyback, had much if buyback with

is buy supply that's Goliath either any and X your components. supplying part you the build any of is, key your a And many there the a enough companies that components cost their X or the there second base reduce small of suffering can companies that out better and company that -- inventory? like you company for can company cost Is bulk buy where a maybe your there is are that it seems

So and let's more. then can some answer you ask questions, those

provide Lynn back so what's bought detail what So will we've and maybe far remaining. of

please? could So Lynn, question, you that answer

Yes.

purchased have we $XXX,XXX. of today, of cost as lower So the shares than at XXX,XXX slightly

So the go. plan we will end March, have current at repurchase the XX,XXX about shares and of expire to

restart a to decision results, we make going are a So plan. repurchase after our new we Board reported see will QX to if

Okay.

So On [ hopefully you, of that answers the question components. that ]. for part key Frank

really a than supplier. closed, sourced, we The etcetera. that go in factories unable to cases have few manufacture the to combination people more to was were issue all, lead work, singly of very we we so with are were sure People concerns. because times, a of make particularly First one it China, in supply-related were unable

So there there's of when And key people which it's were in up. we there's then of which there's that is made. a did, lot a those weren't inventory many shortage, situation who components. to our who it, want want life, some components have components, went And and why like any people kind you hoard the --

supply we which guarantee the production. hard itself, We demand is with we the for will need is situation down supply. more do, the need Now resolving in companies to that have any multiple costs and sources because component, don't to each come to work purchase line to

this no than was situation household it anything me, had different the COVID personal when started, is to items So else. whether or for people

a we people that. competitive and was think and spent a get better, it buy There managing as pricing. we've job went hoard and to they've And now shortage prices that We more our to up, resolves, in now again. It done But -- inventory more and shortage. down I inventory. put of and bit come drove reduce to little good money back our situation a will crazy

XXXX extend standard partners or credit think is we our no thing times a did unable to at have during I nor lead we we beyond received from weeks. were which one time our our deliver lot The XXXX did, that we of to from X

to to that lot and operations of make a So credit our due to team happen. that manage

as situation current the key components. that's So regards

you new think everything don't back your Okay. goes business of and original selling reaches happen and normal, two, did near if capacity for your what which at a chain are inventory your And and one -- somewhere when, considerably. question, full had three if changed final percent your come, all coming when products has But to increasing? I'm years if to say, onstream, I is products sure the your is for forecast going plan supply you're but as you let's

question staying I and What expect shareholders your could X products far Because company going My see the at how next years? the years. -- see you XX% of X for well the product as only the them? can news where quickly do functioning X for to X you forecast as or next components as maybe the is, good sell that is or coming in is the alive with the as

right. All

I'm okay? you're a didn't slightly have we of maybe give answer you different to issues. expecting, all, supply So First than going any

other impacted what to sales was think our components a solution. required deploy availability more anything of than I else the

need So deploying person they for a point-of-sale components. mobile a solution, about X

drawers, printers They our They without need to a a and The were available need wanted in deploy iPad. of scanner. cash and availability really because were waiting severely drawer, customers who to to impacted them stand. XXXX, deploy, X were a can't key a that deploy, and even and so cash need printers printer scanners those elements, They cash an cash drawers. register. on a set for were up unable they And you and iPads,

I but our not supply. not to because term and it's cash couldn't The printers components the of we has It's the be, short think key other it of are couldn't needs where in sales people retarded has supply, drawers improved. solution who supply that because

our us better the own. products will work of on we of call other not sales. half are and and part They the be it help have out of in elements just We're we able monitoring more products. of to be sales, that and And XXXX, a But our on their to They're stand-alone don't system system. retard the unavailability the certainly well. as does situation, feel last that pointed that will second

going is at buybacks you in the I problem through still well think far just and it's I the the only though problem the as the in the point Well, is, price world it's all X this basically and as problems is but stock very remains years, growing the Okay. under time, so with entire for succeeding see just COVID that struggling and on. undervalued. so sitting even company the way and here so some and cases, that forth of product flatlined, disappointing And is so and with

it's so related of share. different buyback, the buybacks, you're my shareholder befuddles of that companies and amazing and there again, products did just doing mean to just see the at as it. I flatlined me, That's question forth, price $X me to in just many But do it, a broker is the former it's it's and a

share think for we your No, we share year. still been the We'll well. Yes. have as that we better reasonably have And and do years a price it's what everybody, long we results upside. a we got to improve can this frustration. through X tough see it of term, I lot But overall,

So yes, short the we it can't do term. in anything about

We we'll things you rolls as see are as how know, the back, out. the and shares buying progress year

Okay. guys. Great job,

Thank much, Frank. you very

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

I'd a and Thank call like wish all in participating to today's good thank for you Okay. just you. afternoon. everyone

today's And thank conference. you, ladies concludes and Thank participating. you gentlemen. This for

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