Q2 2020 Socket Mobile Inc Earnings Call
Welcome to <unk>.
20 Management Conference call. My name is Garett will now be your operator for today's call before we begin.
Thank you everyone.
[music] stages within the meaning of section 27, eight of the security Shack Nike already drain as amended and section 21, the Securities and Exchange Act of 1934 estimate.
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.
Statements involve risks and uncertainties and actual results could differ materially from their results anticipated in such forward looking statements because a number of factors, including but not limiting the true that's the risk that manufacturing manufacturing of socket products maybe either.
Later or not rolled out as predicted due to technological and 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 part.
Nursing current distribution channels may choose not to distribute the products or may not be successful in doing so the risk that acceptance of sockets products and vertical application markets may not happen as anticipated as well is other risks described in sockets. Most recent form 10.
And 10-Q reports filed with the Securities and exchange [laughter], sorry does not undertake any obligation.
Any such forward looking statements at this time all participants are listen only mode. Later, we'll conduct a question and answer section. During the question answer session. If your question. Please press Star then one on your phone.
Please note that this conference Spiro quoted I will now turn the call over to Kevin Miller, Kevin You may begin.
Thank you operator.
Good afternoon, everyone and thank you for joining us today.
Our Q2 revenue was $2.7 million, a decrease of 46% compared to the.
To Q2, 2019, which resulted in a loss of $768000 for the quarter compared to a profit of $120000 in Q2 2090.
Our Q2 revenues were adversely impacted by the co with 19 pandemic, which was anticipated over 70% of our business is driven by retail centric applications.
Business segment, which we predicted would see more than a 40% reduction in Q2.
We're not surprised by these results.
Why do we continue to live and extremely unpredictable times.
There is a high degree of uncertainty today.
I'd like to share what actions, we are taking to ensure we both survives the current environment and are in a position to recover as economic situation improves.
We believe our retail related business continued to be impacted.
But that we will continue to capture a large share of the available sales.
The business equivalent of racing under a caution flags we.
With all hold our current position.
Well, we'll be doing so at 60 miles an hour instead of 200 miles an hour.
Therefore, our focus will be on increasing our revenue in the transportation and logistics segments for the rest of the year.
We believe this market will be less impacted during these times as food deliveries on online shopping our activities that continued to be needs.
The transportation and logistics Marcus for our type of products is significant.
It is estimated to be about Turkey $5 million annually by BDC in a recent report.
Currently we believe we have a 4% chair and believe we can grow this share in the coming quarters.
Even though the underlying technology is the same both the hardware configuration and software requirements in transportation and logistics are different than at retail.
And we need to make the necessary adjustments in order to be a meaningful player in this market segment.
Our Jordan slides, but the ex cover pool, coupled with our family of Apple iPhone Juris Leds.
Enables us to deliver the single handed good I'd solutions these customers require.
However, the hardware is just one element of the required solution.
They also need the appropriate software components.
Unlike in the retail markets, which is very application centric to transport and logistics market is more a cloud centric. Therefore, we need to fully support the cloud centric interfaces used by this develop our commanders and.
We have completed our development to grab a script and our react nasal will be completed shortly.
We also announced and you medical grade scanner that de 755, which was designed to meet the requirements of the medical markets.
We decided to make this product in late Q4 prior to the covert 19 pandemic.
While the market for Bluetooth scanning and health care is currently small and today's strange world requirements can change quickly.
On the expense side, we have taken action to reduce our expenses and we'll continue to minimize them going forward.
Well the situation is extremely challenging and there remains a great deal of uncertainties. We believe socket mobile is better suited that most to survive in todays you re obviously.
With that said I'd now like turn the call Overkill, Enzo sockets CFO Lynn.
Thank you Kevin.
But in second quarter, two point, and then any way down.
Alright, Claire I everything and.
Same quarter, a handful by 20%.
Net loss for Q2 was $708000 compared to net loss $90000 in that immediately.
Net income of $120000 in that.
On the 19th.
Well, marking our revenue per day three and.
Eric and ending June 30, 2020, with 50%, 52%, respectively compared to Q gross margin on revenue of 52%.
Corresponding Carrie and 29 team.
Operating expenses for Q2, or 2.2, meaning a decrease of 10% compared to the same quite a year ago and then equally.
Sequentially from Q1.
Operating [laughter] mine.
Our 4.5 million decreased 6% compared to the same period a year ago.
We continue monitoring our cash flow coke.
In April we received along I see a 1.8, many ending that I see a paycheck protection program.
No one could find many cobre Panama.
And your Kennedy.
During the eight week hearing from April Twentyth Jean Paul.
PBP long, enabling can maintain our staffing levels.
We believe we qualify for loan forgiveness, and the data more than 80% football likely to be front and then.
Mechanism to apply for don't forget that that's not been about your ASP in Q2, and therefore way included that in I have a mom and dad.
We will apply for loan forgiveness once the application process. It's a memorable. Please you can likely in Q3.
Whatever among into for again, well be treated as I say income in that period.
The remaining pushing up the bone will carry a two year maturity date at a fixed it may take any rate of 1%.
We also received $150000 economic India, he's asking on the Sta in June.
And your interest rate they point and then and then that dollar Kim can be extended for up to 30 years.
In addition to continuing to leverage our revolving bank credit facilities, we continue to use a minimal government loan programs to meet our working capital needs.
At the end of Jim the balance of our cash.
29, Manning and our total debt was the 1.73 million consisting of $530000 bank debt.
Good day at 1.2 meeting at the a long.
Now I turn the call older to the operating carefully actions.
Yeah.
If anyone has a question you can press Star then one near Touchtone phone. Once again, if anyone has a question you can press Star then one on your Touchtone phone and I'm standing by for question.
[music].
Yes.
Mr., Okay, and if you have a question you can go ahead with your question.
Hey, Kevin.
Just wondering maybe just start if you give us.
Update as to how.
Ah July has gone as you know a lot of states reopened.
[laughter].
Yeah, I'd be happy to do that certainly we so.
April may being extremely weak and we've seen a marked improvement in the situation in June and July So I think.
Our.
Revenue is very much tied to the level of open this up the economy and yes, we were quite pleased with June.
And we've been very pleased with July and I think our concern remains at the economy stays open I think we'll we'll hold.
And have a good.
Q3.
I think in the current environment, it's difficult to see us, making it all the way through September without some type of locked down based on the pandemic numbers for seeing across the country.
Right Yeah.
And just a question in terms of on the transportation logistics market is indeed, what you're addressing their related to like sort of the ecommerce last mile.
Logistics, Yeah, I love of is that.
A lot of it is so I think that we have focused.
And we have a very strong market position in retail and at some of the commercial services related activities, but our focus has been very much on people who are going to develop a score blow on occasion.
Provided all of the two for those people.
A lot of people are essentially using Mcleod and then using just browse there are some.
So what we call like T cells.
Client software.
Historically, we haven't provided the best solution for those.
Next of customers.
Over the last 60 days and we've both got better products to suit their requirements, but more importantly, we've got the software elements in place so that they can adopt our technology more easily and so yes, I think thats exactly the type of.
Last mile as good way to describe us.
As we will be involved.
Okay and related to that.
Just give an update as to what's your relationship is like with Shopify, which is.
Sort of obviously experienced enormous growth I mean, they've been expanding their solutions as well. So is what has your relationship with them evolved I know historically you provided hardware for the Pos So yes, we continue to fully support.
Shopify and.
They continue to sell our Bluetooth scanners their primary scanning solution.
I think there's two elements the shopify business, there's the online element and the physical elements I think that many people.
Rush to get online.
When the pandemic struck.
As a results Shopifys online business has gone through the roof in terms of numbers.
We don't necessarily benefit from that portion.
We benefit from the physical portion when somebody has both an online shop and the physical store.
What we believe is likely to happen.
Is that as the economy opens up again, many people who are using shopify fall their online so well have to make a decision.
Whether they want to have one system that covers both online and physical stores and then upgrades there.
In store.
Solutions to the Shopify.
Equivalent so my portion I should say.
Which we believe will be the case, but I don't believe we have benefited from that yes.
And that would happen as the economy opens up so I think that's.
Today, many people have essentially two systems. They have their in store system was the hot for some time and I know they have shopify online and those people will have seen a consolidator on two systems going forward.
We will guest spending would consolidate but we haven't really benefited from that yet big except to the point as the economy open those customers are opening but the full force of it hasn't been rewarded yes, but we expect that to be a good source of revenue as the economy opens.
Okay, one last one from me.
Just on the medical grade scanner.
What's what's gonna be the price point for that and how do you anticipate sowing.
That.
Through one of a.
Distributor.
Well again, our model will be very application driven we have a number of app application providers in the medical space, but we didnt have a good medical grade Scott they were using what we call. It just our standard scanners.
The medical community.
Last maybe 18 months ago.
Hi.
Authorized our decided on a medical grade plastic.
It has a number of prop that the medical people.
Watch and therefore, we have to review the scanner in the medical grade plastic and go through all the certifications.
We started that late last year.
And obviously, the timing looks a bit fortuitous now, but our focus would be to enable application providers.
To use that device in conjunction with an application. So from a business model point of view that identical and obviously as some of this will be also web centric our cloud centric.
So that the tools were doing.
Would be.
Across both categories.
The reason.
If you look at how our market segments today healthcare is much smaller than transportation and logistics.
And that's why our initial focus will be on getting more market share in the bigger section first which we believe we can do.
We won't come up in health care, and we think Theres. There's a lot of things that may change Q2, the current economics.
Duration on the pandemic, where.
There might be a lot of people using mobile devices, whether it is to take blood samples to test.
Give out vaccines overtime, and having a product in that market space seems very prudent at this time.
Sure. Thanks.
Dark.
And our next question comes from Allan Lyons go ahead Alan.
Yes, Hi, Hi, Kevin.
The had a question with efforts to.
Foreign sales versus U.S. win and turn for the downturn, where they pretty much equal or.
Where's that worse overseas versus here.
I would say that the.
Overall, they were pretty equal, but we did see some timing differences certainly we saw the impact I think sooner in Europe.
And then in the U.S. However, we are seeing floor of recovery in Europe than we are seeing into use so I do think that.
The economy's open we will say.
Better numbers from Dallas sections of the worlds.
The Europeans I think as suffered in general.
Sooner.
There are locked down was much more severe abbas they have been much better able to reopen.
Now at the moment I think the Bakken across this environment. So I think it's still too early but we can definitely a high correlation between the level of.
Economic activity in a region and our associated sales.
Alright, okay.
Okay what about.
Developer Cal is that decrease since you have the March.
Hold on your own there as far as developers.
No, we're still doing quite well with the developers.
So we continue to have a lot of.
Apps going through the App store.
Thank you.
Software is one of these.
Areas, where having people walk remotely.
Works, well and people do seem to get a lot more Don those also better sense of urgency.
Obviously, we're not seeing as many retail related sales activities, we are seeing more in.
Areas like transportation.
Commercial services and healthcare. So again I think people are trying to get themselves options to use mobile devices to solve some of these problems.
Different areas.
Okay.
Our.
Have you.
[music].
Extended the or got it.
So renewal of your.
Wider credit or is that.
And then a whole because with no. So that was all renewed in January So we signed Lynn can correct me here I believe a two year.
Extension to our line of credit US. It comes up every two years, we renewed that revenue rate as normal. So we have our line of credit is in place and we've also obviously added the various government programs too much oral.
How much how much was aligned renewed for.
To put segment.
Okay, and what have you borrowed on that.
Sure.
Yes, we borrowed they didn't slimy $50000, there and as of June.
And then when you had.
Mhm.
Drying capacity on the line that I know the $800.
Okay.
So.
Based on your best visibility and if you don't get shut down again in the.
Areas.
Yes.
Thank you.
Financially.
Apple to weather the storm, but between the.
Let government lending and line of credit that's fair statement.
That's fair statement just south.
Okay.
Okay and.
Have you found any or larger.
While small businesses have in terms of them on going under.
Affected you all are just because they are closed off and they're just not buying.
I mean, we monitor our sales up pretty.
Closely on a weekly basis I think what we're saying is certainly from our bigger customers.
We are saying the same customers just at lower volumes at the smaller customers are hard harder because they're not every day customers.
So.
But I would say many of them have either stopped buying our buying much smaller quantities, whether they'll are out of business or not we really can't tell at this stage.
All right.
Your larger sales through Ingram micro install.
Correct, and we're still selling well on Amazon on CDW and those type of platforms. So.
That all is happening.
You can see so obviously, we have days over long periods of time. So we can say that the percentages have fallen in most categories somewhat in line, it's not status and the other thing is we're very diverse.
And that we have.
A thousand applications that have gone through the mfive process, all of which are adding to our numbers. So even if we lost a few.
We're not highly dependent on one or two applications Mary.
Okay. That's all I have one.
Good luck and hope things start turning the right way again.
Alright, Thank you very much out yes.
Our next question comes from Travis.
We don't have his last name private sector on the line and ask your question.
I'll I was.
Basically just wanting to know more about the opportunities in health care.
And using the product is the way too.
You know track.
At a distance more and.
There is anything being done to open up some of those opportunities.
With co bid and et cetera.
Yes, I think that we are and enabling technology ultimately far a hospital are for.
Somebody who's doing track and trace stay need piece of software that allows them to scan and spring that information.
Associated with that take patient record et cetera.
We are seeing a move where people want to use more mobile devices, especially as yes.
Theres a lot more work being done outside today than inside ads.
I pad sand I phones have long battery life gives you a lot of computing power in your hand, particularly in an outdoor environment.
Well, we're adding is the ability to ads.
I would say except to both barcode medical grade Barcoding scanning is to those applications and that we provide the tools to allow people to do us but ultimately.
The application is what people purchase and and the application is swap is deployed today, we do not have a lot of applications in the medical space. We probably have 15 to 20 that have gone through the MF high process.
By enabling them to use medical grade scanners, we would expect to see more applications, which in part will lead to more sales, but it's not a short process now the processes. These days are compressed because there's a war going on if you will.
So we're in an enabler and we will give you more color on that at the next call, but we've just started that process.
To make sure that say.
Can have the tools they need to build these applications.
Very good.
So basically there there.
You have.
Product available I read in August starting in August 12 or something.
Yes look not.
That's not.
That's basically and new product.
Available and are there several competitors that have.
Same.
Approved.
Product or did you guys just the last year you had.
Can you kind of have a head start on a lot of books.
Yes, so again, our product will be Apple certified which makes it. It's one of the few Apple certified products I believe it's the only medical grade Apple certified product now, which means that fair someone doing medical application.
On an Apple device. So they can add Medicaid grade med medically approved our medically compliant barcode scanning to that application, which would be a requirement are the nursing our clinical staff that they would be sounding too. So yes, we believed that we again.
I've done this early we've enabled the markets, but we only enable someone actually has to compete the application before sales are generations.
So yes, you're correct in the deal only one.
The Apple.
Can utilize medical grade.
Correct, Yes, and we basically are we believe were the only people that are making a medical grade scanner. That's iOS certified in the market today that is.
We believe that as the case.
And that Mark that product is not been selling up to this.
It's about the come online in August.
Correct, but bear in mind that nobody writes off our for hardware that doesn't exist. So you have to produce the hardware before someone will write the software and we've produced the hard work, which makes it possible for people to produce the software using is and that process usually.
Thanks, I would say under normal circumstances, it would take sit at probably 12 months in todays situation as people scrambled to get solutions in the market, maybe its compressed to 90 days.
But.
Pedigree started the day to compete with you.
How long would it take them to get.
Get it I guess certified.
Medically Rob.
We don't know, but we can tell you and that's one of the reason we mentioned we started this process and probably December of last year. So it took us essentially seven months to get the product in the markets.
So.
It's not US you know a five minute process, maybe a competitor is better or worse, so somewhere in the region of probably that say five to nine months, if we say.
Seven months, plus and minus two months so five to seven months I think would be a reasonable estimates of how long a company. It would take for a competitive product to be in the market I don't know if someone has been working on something like this and we.
Tipped up to the post boss if they started now I reckon five to seven five to nine months.
Okay. Thank you very much.
Thank you traps.
If anyone else has question. Please press Star then one on your Touchtone phone.
So again, if you have a question Star then one on your Touchtone phone.
And we have no more questions at this time.
Okay. Thank you operator, so I'd just like to thank everyone for participating in today's call wish you all the good afternoon and hope everyone is saying six thank you bye bye.
And thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.
[music].
[noise] [noise] [noise].
[music].
And.
[music].
[noise] [noise] [noise].
[music].