Socket Mobile (SCKT) 27 Oct 232023 Q3 Earnings call transcript

Welcome to the Socket Mobile Inc. Q3 2023 Earnings Call. My name is Jen, 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 manufacture of Socket's 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 Socket's application partners and current distribution channels may choose not to distribute the products or may not be successful in doing so; the risk that acceptance of Socket's 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

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

joining you operator. afternoon, Good today. Thank everyone, and us very much, thank you for

operating $X.X $X.X QX, QX was revenue of million, of an million we QX QX decrease loss to a compared Our compared XXXX. million In in XXXX. had operating to loss $X.X XX% an in $XXX,XXX

Our partners' QX much inventory expected works. our than distributor by to begin system primarily how explaining due revenues were levels. I'll sales our changes in delivery lower

end Socket to Mobile the users our We distribution distribution our first delivers Ingram, products sell system. tier. most X-tier of which our such to via as partners, is its products

users. second is Our resellers deliver distribution Amazon, like partners end which resellers sell products the tier, to the the to

the revenue distribution expectations. with and impacted of dramatic partners than Our by were the our reduced than does reported have picture higher and on from it interest in much inventories it market rates. by and this to provide We sales and reduction more driven demand a was line uncertainties the revenue, impact accurate resellers underlying reduced significant our our a in products. significantly QX, end not And demand that demand for by reported that they QX believe distributors our was believe our a more underlying was significantly had users business, their selling The XX% inventories. In impact higher inventory on their revenues because purchased. QX while distribution we

and to launch to call complete significant contributors side, positive we Dave will QX, in who will Dave? to provide would now turn products milestones projects longer-term the the the the over achieved On an to update and like be quarters. I products, that in we're products major able revenue believe coming on QX. many of we several did significant our Holmes, in

Thank everyone. you, Kevin, and good afternoon,

today, how few milestones said helping Socket I'd in about in that a bit our Kevin As Mobile to the more Case, into highlight line are in QX investments of in harsh performance and new we high-quality XX, in little opens transform and XtremeScan designed customers We innovation to significant a XX, launched It configurations, manufacturing, capture with is to and like milestone talk product achieved data different ultimate data works product to and QX. XtremeScan commitment withstand for Grip This the products significant XtremeScan comprehensive solutions XX iPhone for capture of company. several delivering and and XtremeScan three comprised represents iPhone segments with airports. XtremeScan warehousing, The scanning are that our difficult the XX. capabilities customer our gas environments. industrial a demand most oil enable family designed industrial, the military-grade door offering robust iPhones new into durability. conditions, in a

based CXXX, advanced solution. SocketCam launched also cameras We an scanning

service the scanner, camera-based are conditions or our launched with dealing into include wide those CXXX service a demanding or was SocketCam with the of a those users QX. users can SocketCam also CXXX printed our their of price-sensitive end integrate CXXX fees requirements. SDK is needs, performance-sensitive for QX access data capabilities barcodes. needs of upgraded and we our CXXX hardware SDK challenging to in end more licensing address CXXX in is approach This free apps. with fee. Capture fully the free full -- various with a They end with App or users scanners. CXXX applications. for SocketCam our Capture Mobile is developers end to compatibility NFC any scanning simply meet them follow-on with monthly supports XX. barcode and complete their iOS capture subscription damaged the their to maximize scanners across working for writers This enables requirements reader IOS and can poorly to There app application and performance It data range product of into in Socket enables capture tailored users. that with and line. their providers fully Android users entire no SocketCam range developers to Ensuring SocketCam with that

of applications Capture Mobile integrated been has Socket industries. across SDK thousands into various

extend and reach diversify will base. customer our our products new Our

SocketCam on sustainable revenue us and a Mobile will each make less this also with a recurring Socket provide dependent retail. and will diversified more stream month. Ultimately,

complete company. With capture becoming more it are financial for turn details I'll to Lynn? our data more We on a that, hardware over results. and Lynn software

Dave, same joining XX% everyone, representing from decrease call. was for QX, our million, thank you, last to the quarter Thanks, $X.X decline today's In a revenue and and compared QX year. a XX%

QX revenue reducing the distribution decline distributors totaling to million. our Kevin partners is users elevated in due distribution primarily end from into to rates. reported As to sales explained, uncertainty their $X.X contrast our our was The In based revenue sales reaction persistent channel. market to and and on inventory interest resellers

$XXX,XXX into QX figure of channel in adjustment for returns shipments, channel million. only excluding sales $X.X and Our distribution This were inventory. the includes $X.X million a reserve

decrease such annual $X.X first of was G&A margin the concentrated compared of in QX decrease were year. the gross were as allocation during the to million, the a X.X% QX decrease was costs to lower was of the quarter. which margins X% a due expenses to gross shipments from manufacturing half primarily reflecting XX.X%, The a year. compared overhead previous decrease prior in across to QX QX operating audit, certain in X.X% reduction The the representing Our due quarter. and QX costs, primarily

costs in higher operating their new increase associated than XXXX However, the development with count. QX expenses the the driven product were by head and X%

$XXX,XXX loss $XXX,XXX loss $X.XX $X.XX share recorded same $X.X period per and net the net or we last year. million in in QX, loss per to share of During or net compared or share of QX per a a of $X.XX a

the and the Our including negative expenses $XXX,XXX compensation $XXX,XXX base amortization, a $XXX,XXX negative tax a [ last depreciation, expenses, asset quarter was and in QX EBITDA $XXX,XXX The QX. compared a amounted same noncash in year. income to ] quarter total prior to positive in

our Moving sheet. balance on to

was Our of million $X.X to decreased cash September XX, balance as XXXX. $XXX,XXX XX, compared December

note X by cash in outflows included offset were Over the $X.X $XXX,XXX the in financing outflows and months, million expenditures completed primary $X.X for activities. May. partially capital The operating the convertible million

the In terms quarter a million, XXXX. of inventory, with million the ended slight of $X.X from $X.X at end we decrease

prepared This wraps remarks. up our

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

come with Singular Sakai question first Research. our And from Instructions]. will Chris [Operator

demand. sales substantially about is quarter? end you higher the and that a estimate you should talk could that Can resellers how And users we for this coming to at your say good and look quarters? that the that How were in be

million. sales distributors was end and $X.X our from so resellers users to Chris, Okay.

almost So sales in X.X%. our -- were

billion channel. So the of the contend balance We really the is a million of reduced the million. would delta was the what in that $X.X fair than the products underlying for $X.X is $X.X distribution in inventory demand

were static. any believe a relatively than have they're rate. is million of combination maybe that, I the that is They they this million short about So only same low. too brought relatively high. the the And were now of which in add people supply of think, of, in Today, interest needed relatively the in beginning term. consequence I had possibly concerned low, where the is at think, and they approximately And objective and subtract quarter. which pandemic they inventory we $X.X $X.X our historically, is inventory and more distributors, rates, inventory, and

So inventory inventory little part barrel keep hard $X terms closer going to and bottom we we be a to kind think bit would of to we've of that's expect maybe reached the possible. in $X.X work of what's I would And low stable. million, that of million the forward, the

would contend use X.X% demand So to your is a reflection better for that as the model number quarter. in and the a I would underlying number the question, answer would we of X.X%, the be demand, the that saw we

expenses? we Okay. where do Where about in you should future? -- we And can the them see then operating going talk

ahead. Go

Yes.

and products, the in Just investing and continue manage on liquidity their -- their other of while yes, new to is market uncertainty try challenges tightly. focusing management we expenses their we aware

the for next overall that the expenses during So the operating expect to And year the for this at we of the [indiscernible] their QX in year. be level. of expect year at will rest same we year, as the QX at half level be first similar

time. are any further no remarks. there this conference at the Mills, or questions you it for back I'll Instructions]. to closing turn Mr. [Operator additional And appears

all Goodbye. call, a thank just Thank much, for to you wish operator. everyone We'd and very afternoon. good you participating in today's like

concludes conference today's for attending. call. you Thank This