Socket Mobile (SCKT) 5 Mar 242023 Q4 Earnings call transcript

Welcome to the Socket Mobile Inc. Q4 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.

factors, may and the may risk channels partners forward-looking Socket's of or opportunities of rolled product not risk necessary distribute not capital; manufacture Socket's results of happen XX-K not number risks and predicted be components Exchange reports differ so; results statements out Securities include choose in the vertical limited as risks financial Commission. a Socket's as factors, from happen other the not distribution that acceptance delayed materially that as the the market current markets anticipated anticipated successful or of the statements uncertainties that risk actual and may could anticipated; because to, XX-Q Form and to in Such be and well the products but that Socket's technological, or recent and may described and including, to in products sales market in including products as application may of not not due filed the acceptance doing availability with most working as risk such application

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

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

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

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

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

our Our XXXX expectations. financial performance below was

demand XXXX, our accurately the as in our X.X% determining of a sales underlying the resellers view out, out strength million is which our products partners sales reflect sales million. $XX from million, and XXXX the end customers, the totaled revenue business. reported key that In out, the metric believe does to were $XX.X we $XX.X distribution that from decrease sales We and in services. not for underlying However,

distributors While demand reported XXXX, did a soften which had year-over-year in and XXXX, dramatic. sales to in positive negative also impact on sales the a in the XXXX, decline made had of in late shipments reported on XXXX timing impact

was our by reserve partners inventory and levels rebalanced revenue other on XXXX demand situation. reductions in also adjustments Our and impacted distribution inventory based the current as supply their

products, XXXX, the we many major will complete able our positive we be believe quarters. in we're of coming to and in contributors significant side, longer-term the products did On to launch projects, that several revenue

call will who moving achieved like would and our update over the Holmes, XXXX how turn products an to impact will significant I Dave now Dave? forward. business milestones to provide the they on in and

everyone. Thank you, Kevin, and good afternoon,

said, into XXXX. solution. achieved and today, data advanced significant a a how we Mobile products launched bit like XXXX more I'd end on investments an about capture company. We our a of little Socket a transform As car-based year, the At new the won CXXX, scanning of SocketCam several in in that few the to Kevin we innovation milestones highlight in talk are helping

launched XXXX. a free our in SocketCam CXXX CXXX is scanner, follow-on SocketCam to camera-based earlier

licensing CXXX CXXX bar end needs conditions wide and SDK offers scanners. variety users those of for their SocketCam the into of address to to with app our apps. fees and our platforms dealing They users providers service or a This data into their applications. users or more with damaged demanding our include and working CXXX an simply There capture performance-sensitive our tailored requirements for enables with price-sensitive various with integrate them from with any hardware poorly end Capture codes. is enabled are scanning free upgrade on SocketCam for with both in path iOS or printed users Android needs, challenging those no

users access CXXX capabilities SocketCam the fee. end a monthly subscription App via of

in XtremeScan and commitment designed XX, Our XtremeScan significant solutions also milestone It's of X to our manufacturing, in XtremeScan product family with different delivering XtremeScan and Case, our warehousing, data oil iPhone XX. comprised all This industrial, a configurations: XX, introduced for capture Grip, XX airports. XXXX. customers iPhone represents line product in gas and was and work and high-quality to

in XtremeScan customer iPhones conditions, difficult military conditions. scanning the durability. withstand segments harsh ultimate the new is that enable robust designed to to demand industrial door with grade to offering opens This the capabilities performance most

of starting in. partners. XtremeScan lot traction and with through initial earlier SocketCam extensive getting feedback and Each are testing gone We're see gaining and to has customers adopters. our Both good a our come by orders

progress made SocketCam in XXXX. also with products our We

with SocketScan SXXX integration comply Apple's Our seamless vast Wallet. wallet to with certified is protocol, enabling reader Apple Apple NFC mobile

it a Sony's standards. Cypress and Also, SXXX Universal SocketScan Additionally, Forum. mobile meets from reader received certification QR standards International and wallet our NFC silica code security NFC

including needs, drivers These digital products wide our mobile cater payments. certifications and nontraditional wallet empower a to of licenses NFC passes, range to

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

SocketCam and will us retail. guess, recurring dependent stream a provide less make Ultimately, each I month. on more become a data We a company. and Socket complete Mobile diversified revenue hardware capture more will with software and sustainable

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

by actions decline channel joining experienced reduce from result their the [ starting $X beginning a back in you afternoon, a of inventory for the at call. the million to year-end. million In return distributors. a by Good we everyone. as year ] Dave. softened products, XXXX, They inventory demand taken of orders Thanks, channel scaled $X and and today's Thank

reserve an prompt our revenue. impacting also further in returns These for our increase returns,

$XX from contrasts XXXX down result, we with XX.X%, costs in due and XX.X% component Gross shortages XX% million, extended was increase XXXX. $XX for faced costs when decreased is to million XXXX. an lead to our margin elevated rise XXXX which revenue year-over-year to decreased from the a As The in attributed times.

resulting $XX.X headcount, in increase and salary million a in higher due XXXX. expenses increase reached X% payroll-related the increases from $XX.X adjustments year benefits This partially costs. increased is Operating for from expenses the million, to

accounted invest to of in to with as associated increased business we fuel software amortization continue we Additionally, long-term development growth. our our for products costs long-term

the In per ] $X.XX which XXX solid of the loss amortize XXXX. Section the the and share compared Cuts earnings and requires years to adoption $X.XX in per of Tax diluted Act company XXXX, of had share [ Both was R&D expenditures. capitalize XXXX, to of Jobs diluted

in negative a EBITDA adjusted for the decrease XXXX significant million, The million $X.X was positive from XXXX. $X

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

quarter. prior was in operating decreased XX.X% over compared were margin gross year's year's in over the the but quarter, quarter. $X.X QX and preceding XX.X% QX to sequentially quarter increased expenses X.X% million, the prior preceding X.X% XX.X% the

loss an adjusted versus Jobs of XXX were preceding share In the included and in $X.XX $XXX,XXX Both quarters' ] income Cuts QX, XXXX. year EBITDA $XXX,XXX ] a $XX,XXX quarter. of diluted the operating in compared a of a of $XXX,XXX adoption compared tax QX we [ per and $X.XX was results loss the Section to year QX ago recorded QX [ earnings Tax loss in Act million benefits loss XXXX. of QX. $X.X to ago and $XXX,XXX a related to

million. cash the of concluded balance We our balance a with sheet. $X.X year to Turning

by During accruing [ $X.X notes. XXXX, in capital million ] we expenditure subordinated invested $X.X and million convertible raised

inventory million at our to As a net XX, was $X.X compared level year December XXXX, of $X.X of reserve million ago.

up This remarks. our wraps prepared

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

first question ] Instructions] BJ with Our [ [Operator from will come Cook Singular Research.

to sales your in you're issue to plan a reported press more closely revenue align accounting you aim to different going release a or with You demand. that? breakdown Does guys going this of forward recognition that the with underlying mentioned have kind

on recognize into channel. distribution. inventory No, in based this balance is sales revenue to Just the the We

of measure terms also a inventory. stable sales to out have buffer, be to We distribution the a aim of We in of reasonably buffer distribution. but amount

something our in that I by larger in, why we got much during end than higher about sales the which $X the were GAAP our It XXXX, in think the $X XXXX. on sales always out in reached pointed will based as and $X million XXXX, requirement. to reduced were concerned change. million million our out, And supply a people keep is and we we is at forward. can as and going sales and we legal try reporting level buffer as that's because reporting will be But nothing the follow manage, it's will it we

one Just more.

adjustments? sequential growth, level the Given channels further guys down. Or more the Are you revenue you are in mentioned seeing there is going forward? inventory normal that

level reduced more the think is normal. much I

situation forward. is I have at narrower of expect that kind the through pandemic, work it more whether buffers, very it and in generally, and north off their to supply be issues to home think or and think have people supply, excess inventory as the the much burnt concerned people about a added I in right? we resolved, now going were range remain

move Swanson, And we'll [Operator next Steve Instructions] Private to Investor.

Kevin, on demand, comment company? your distributors? that more is aligning into a the making the you were pull from on underlying reported push is from just with distributors sales the the Or closely a back sales it

It's a pull from the distributors.

pull that they going they before, talking is to over, just away them push didn't be Is too because you're it and and once all then they before really do which back you much was COVID So did that. of need and pull what COVID to frequently more right?

Yes.

I think the...

times that you're they're going more that ask them of they whether product a you want with chatting of sure kind before I thinking be send so to You'll we're the couple what frequently Is guess. it, of? them

questions, really we this the need out, what so when that And see pulling frame harder in what us the selling they're that's you they're -- they anomalies between do in and plan. we ask time will Correct.

the it's a going a like not we distributor, out you're changing we more revenue that and closely bit of pull so So from to whack recognition, did? monitoring distributor. that push a It's but not don't be to get we're

Exactly.

revenue, And $XXX,XXX both marketing do got extremely and sales was XXXX was I marketing. about the in XXXX. revenue -- relative year-over-year high that was and question and $XXX,XXX. was up about next for sales sorry, And The marketing and on because about were -- up $X.X the was up lower up and has research We in million. with basis than was percentage sales a I'm it to development total to R&D they

had are about marketing. to at the overall -- in are we've And million? questions level going are, else sales during $X are same continue we spend to and back year? to the got X going guess, the go for the with sales see that $X.X last I trim those years, we same we we what Or million as R&D the I as

on make lot more likewise, to in and scanning camera-based And to beefed getting and the to the The hold sure enhanced that a will educating of that is current based more plan level. world, updated we the which the those our marketing happen. at added with our We've camera primary SDK is scanning, side, we money SDK to invested that web, robust up Capture of outside is et partners, we've more our complete make interface cetera. resources the terms and team

levels I what with currently line loaded. in all going we're software, to want So Obviously, at think are it's with more the front-end have forward. we

You of done most you really lifting need kind bake over cake it. that to can the before we've last on completely the X sell years. heavy the of And

want team. and looks are And that there small into assure forward. of I extremely investment is areas a us moving people being make hard have to dedicated feel a this to But very long-term these heavy, chance obviously, have market a but in we a we we going lot have we where you little now it bit new of if revenue. worked participants that And needed

from Swanson. a And follow-up Steve we have

XXXX? We thinking XXXX year-end one with dropped I cash last more to we've $X.X total from million. about going cash Kevin, the to Cash we losses cash with million comfortable to from on one hand? need Are we some in going Do are we raise we forward $X.X have to flow flow. for guess How level feel of the -- you. had? cash

the level of we hand we low. with because on wouldn't it's comfortable I have say cash feel

will as the of cash plans year, we no have half correct get this closely. cash. to feel we into second raise monitor to start the itself and We We

have correctly As of lot have out, we very it We point you and of don't a history it well. manage cash. managing a can

So it's tight a but little bit [indiscernible]

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

Thank you, operator.

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

This does call. today's for Thank attending. conclude conference you