Q4 2020 Socket Mobile Inc Earnings Call

Welcome to the socket mobile fourth quarter and full year 2020 conference call. My name is Adrian and I'll be your operator for today's call.

Before we begin I'd like to remind everyone. This conference call may contain forward looking statements within the meaning of section 27, a of securities activation 33 as amended.

21, <unk> of Securities Exchange Act of 1930 for as amended such forward. Looking statements include but are not limited to statements acquiring mobile data collection and Huntsville data collection products kind of 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 <unk>.

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Mobile sells its products such statements include risks.

Uncertainties and actual results could differ materially from the results anticipated in such forward looking statements because for a number of factors, including but not limited to the rest of the manufacture of sockets products may be delayed or not rolled out as predicted due to technology.

Market for financial factors, including the availability of product components and necessary working capital the Vista market acceptance and sales opportunities may not happen as anticipated and the risk of socket application partners for distribution channel they choose not to distribute the products or may not be successful in doing so the rest of acceptance of socket.

<unk> products in vertical application markets may not happen. He has participated as well as other risks described in sockets. Most recent form 10-K, and 10-Q reports filed with Securities and Exchange Commission socket does not undertake any obligation to update any such forward looking statements.

This time, all participants are in a listen only mode.

Later, we'll conduct a question and answer session. During the question and answer session. If you have a question. Please press Star then one on your Touchtone phone. Please note. This conference is being recorded I'll now turn the call over to Kevin Miller, President and CEO, Kevin Miller, you may begin.

Thank you operator.

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

I wanted to start with a quick review of 2020 than our Q4 results and finally.

For the year ahead.

2020 was an extraordinary year by any standard.

Our revenue for the entire year of 2020 was $15 7 million compared to $19 3 million in 2019 and 19% decrease.

Despite all the challenges we faced in 2020, we generated a small operating profit for the year and a positive EBITDA of approximately $2 2 million.

These results were achieved through a combination of aggressive cost reductions a lot of hard work and a solid rebound in our business in Q3 and Q4.

In 2020, we took a non cash goodwill impairment charge of $4 4 million.

Also had a cash gain of $1 1 billion related to PPP loan forgiveness.

Our operating results for 2020 was a net loss of $3 3 million or 54 cents per.

For fully diluted share.

This compares to a net income of $300000 or five cents per fully diluted share in 2019.

Our fourth quarter revenue was $4 7 million compared to $4 6 million in the fourth quarter of 2019.

The fourth quarter's operating expenses were $1 9 million compared to $2 2 million in the fourth quarter of 2019.

Net income for the fourth quarter of 2020 was $1 6 million or <unk> 23 per fully diluted share compared to net income of 60000.

<unk> per fully diluted.

Diluted share for the same period last year.

Net income for the for fourth quarter of 2020 included a onetime gain of $1 1 million relates to the company's PPP loan forgiveness.

To summarize 2028.

It was a challenging year, but we got through it pretty well.

Experience substantial impact on our revenue in Q2 as the world ground to a halt.

We saw a solid recovery in Q3, and Q4 with Q4 revenue.

On a year over year basis.

We also raised $1 5 million through convertible desk to provide additional resources just in case.

Overall, we're very pleased with the robustness of our business, especially as most of our business is retail releases.

We were also very thankful for all of our employees hard work and sacrifice that made these results possible.

Against all expectations, we exited 2020 in better shape than we entered this.

So looking forward to 2021.

A retail application centric partners like Shopify, Lightspeed square and smart Reggie remain the cornerstone of our revenue. We expect these companies to do well as the economy reopens and their applications will drive our sales.

Companies like Shopify helped many traditional retailers get online as the pandemic began.

Traditional shopping was impossible.

These retailers are likely to maintain their online presence and therefore will need to decide if they consolidate the online and in store systems, which if they do would be a positive thing for socket mobile.

During 2020, we had the opportunity to better understand why the non retail portion of our business was underperforming and we made many significant improvements to better address these markets.

We upgraded all our Juris <unk> products to support sales replace for batteries a significant improvement. We also increased the durability and we added health care specific options.

We expanded our jury sled support for Apple devices, and now support the complete upper range.

We believe these improvements will be well received and we expect our non retail business to improve moving forward.

We hope to see the benefit of these improvements in our revenue in the second half of 2021.

We also launched our S. $5 50 in 2020 are fully certified Apple and Google Contactless reader writer with support for rock wide range of popular contactless cards.

When we launched this product we knew we were early for the emerging market opportunity, but as a hardware manufacturer you'd need to be early so the required sulfur applications can be written and be available to service the market opportunity.

However, the pandemic has accelerated the market acceptance of contact us and we believe that this market will grow very quickly as the world Reopens, we are well positioned to benefit from this rapidly emerging market opportunity.

To summarize.

2020 was very difficult, but we but we reacted well adjusted our costs. So our revenue rebound and delivered an operating profit.

We continue to invest in new products substantially improved our portfolio and.

Enter 2021, a significantly more substantial company.

We expect Q1 to be challenging, but profitable and we expect to continue to strengthen our business in 2021 as the pandemic impact is reduced and the restrictions, particularly in retail and hospitality are lifted.

But that said I would now like to turn the call over to our CFO Linda <unk>.

Thank you Kevin in addition to delivering solid revenue performance in Q4, we continued to manage our cost and drive margin, while investing actively in the development of industry, leading solutions, we reduced operating expenses by 13%.

Eight 3 million compared to $9 5 million in 2019.

Although revenue for the full year of 2020 is lower than 2019, our margin contributions improved from 52, 5% of revenue in 2019 to 53, 1% in 2020.

For both the year and the fourth quarter, we achieved positive EBITDA results our liquidity.

T has improved as a result of the profitable growth and other secured subordinated convertible notes.

<unk> completed in August 2020, and other years current ratio was one nine compared to 1.38 on December 31st 2019, and we had over $2 million of cash on cash.

Our loans payable decreased to two one for moving from one 7 million as debt end of 2019.

In December we received the notification that the U S small business administration for against the $1 6 million promissory note in full the note was issued to us in April and their their paycheck protection program.

At the end of January we renewed our credit facilities with our bank and the extended debt maturity date to January 31st 2023.

With the new agreement that domestic line of credit increased to $3 million from $2 million.

That includes $2 million involving credit facility and the one in non formula alone the $1 million non from yellow was enrolled in the California capital access program and the West advanced on February 16.

The company will make a principal reduction payment of $125000 plus all accrued and unpaid interest on the 30th day of each April July October and January over the next two years.

Our credit facilities and the profitability will provide the capital to support future growth and the investments.

At Investor Day recently inquired about our board member and executive officers of sales of stocks.

The company strongly suggested that all board members and executives to set up a <unk> five one thing doing an open trading window with no awareness also material nonpublic information.

The company approves that can be five one plan before the price it can be adopted and as the price must be specified a month price and timing of their transactions.

This practice insurers that are we avoid all conflict and they can focus our attention on running the business.

Our most of the reason to open trading window once it last in November.

Now I will turn the call over to the operator for your questions operator.

Thank you we will now begin the question answer session. If you have a question. Please press Star then one on your Touchtone phone.

If you wish to be removed from the queue. Please press the pound sign or they asking.

So maybe you delay for the first question is announced.

Using a speakerphone you may need to pick up the handset first before pressing the numbers.

Once again, if you have an audio question. Please press Star then one on your Touchtone phone and we're standing by for questions.

And we do have a question in the queue from at the Tres.

Please go ahead your line is open.

Hello.

Hello.

Yes name is strength Petronas I was wondering what the scanner is going to cost.

For the industrial people versus the other.

You don't like.

Just a regular lay man as far as utilizing.

The new scanner.

Okay. So we have generally two lines of scanners are.

Standard scanners, the prices range from an MSRP.

Around $229 up to somewhere in the $600 range.

Generally speaking our industrial units, while the equivalent scanning functionality are approximately $50 for expensive because they come with IP 50 for sealing as well as they're made with more robust plastics.

Designed to be.

Dropped several.

Third Time's a thousand times even.

So the range for the industrial scanners would be somewhere between.

70.

650.

Okay, I'm, just leaving the dentist as we speak Ironically and I was waiting and then I knew you were going to have the.

Well Tonight.

And how what's the is there a general application for the other.

The dentist and so forth because I had to have a certain kind of scans for my upper teeth.

They call it a CBD, but yeah, where we're at.

The barcode scanning business not in the traditional scanning business. So all of our products are used for various forms of track and trace related to barcoding.

Identification through one day two day Barcodes, we can read passports and other things, but we don't scan.

Objects or.

Things that so we're not a scanner.

And then we don't do scanning associated with paper our objects, it's all <unk>.

We also have added.

C, which is a type of electronic tags scanning but were not an object Scott.

Okay. Thank you.

Thank you.

And just as a reminder, this entered the queue. Please press Star then one on your Touchtone phone and for standing by for more questions.

And with.

Oh, well, we just ask a quick follow up Michael Miller for denim construction. Your line is open.

Hello.

Hello, Michael how are you.

Good how are you guys say.

Good thanks.

A quick question for you I know you have a robust Oh you have the scanning shifts from.

And you can drop the phone.

A bunch of times.

Question with that is have you considered you know, making our case.

That could go with the phone okay with.

With it.

Yeah, we have a whole series of products, we called Euro cases are Jura sleds I beg your pardon, which consists of a case with an embedded scanner and it connects to the phone over Bluetooth.

Both protects the phone on the scanner and recharge as both of them.

With the single docking if you will so.

This is the products that we feel are very suited for.

The transportation logistics.

Delivery space.

Because the applications are written for Android or iOS type devices.

People want to bring their own device to work and companies want to.

Encourage that to happen.

But then they need the enterprise grade scanning so yes.

We have been building a quite a good portfolio in this category and we very much believe that this is a good market going forward.

Your product is genius and our other invested money in it and we will continue to invest money in it and the stock market and <unk>.

Congratulations for you guys, you're all boil down you can send you to show growth and progress and the type of innovation that we like to see from this country. So congratulations for you guys.

Thank you very much this great kind words.

That's it for me.

Okay. Thanks again.

And we have no further questions in the queue I can turn call back over to Kevin Mills for final remarks.

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

Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating and you may now disconnect.

[music].

Okay.