Socket Mobile Inc. Q1 2023 Earnings Call

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Welcome to socket Mobile Inc, Q1, 2023 earnings call. My name is Erica and I'll 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 27 eight of the Securities Act of 19 thirty-three.

As amended and section 21 E for 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 market 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 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 might not happen as anticipated the risk that sockets application partners and current distribution channels may choose not to distribute the products and may not be successful in doing himself.

The risk that acceptance of sockets products and vertical application markets may not happen as anticipated as well as other risks described in sockets. Most recent Form 10-K, and 10-Q reports filed with the Securities and Exchange Commission.

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

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

Thank you operator.

Good afternoon, everyone.

Thank you for joining us today.

Q1 revenue was $4 $3 million.

Turning 1% decrease compared to the $6 2 million in Q1, 2022.

Our gross margins were 48, 1% compared to 49, 7% and we reported an operating loss of $993000 compared to an operating income of.

$515000 in Q1 2022.

Our Q1 results were disappointing.

Q1 revenues were impacted by distributor inventory rebalancing activities.

Our distribution partners reduce their inventory levels in Q1 based on the ongoing changes in the supply chain as they rebalance their inventory levels to better align with demand and lead times and this impacted our revenue.

In addition, overall demand in the U S retail sector was lower than we expected.

A combination of inflation and higher interest rates caused a general slowdown I've got the year off to a slow start.

We did not see a similar slowdown.

Internationally driven retail business.

As we said on our last call we expected the first half of 2023 to be challenging.

As most of the new products will not expect it to add to our revenue until the second half of 2023.

The good news is our development efforts remain on track and we expect to launch many of these new products in Q2 and expect them to positively impact our revenue in the second half of the year.

As previously outlined.

Ah stay at homes will explain.

Many of these new products are targeted at non retail sector.

Markets, where we believe socket mobile has a large market opportunity.

The introduction of these new products will better balance the companies but.

But about as the company by reducing our dependencies.

Impact of the retail sector on our overall business.

With that said I would now like to turn the call over to David first costs.

Thank you, Kevin and good afternoon, everyone.

Today I'd like to highlight a few of the significant milestones that we achieved in Q1 and talk a little bit about some of the new products, we have coming up.

We continue our journey of becoming a more comprehensive data capture company.

We continue improving capture SDK, our unified software development tool set that supports our entire data capture portfolio.

One integration with capture SDK.

As our provider partners access to all socket mobile data capture products.

That's your SDK now includes camera based scanning software.

Providers typically had to integrate with multiple parties to support all of their end users now.

Now with one integration with socket mobile we can support all of their end users.

For the ultimate data capture experience our hardware scanners continue to deliver best in class performance and now cost conscience and users can.

Can utilize socket can CA 20 are free camera based scanning software is built into the latest versions of capture SDK.

In Q1, we made significant progress promoting our free camera based scanning technology.

Our partners are updating their apps with the latest version capture SDK.

Enable camera scanning with soccer game.

The first successful releases to the App store happened in Q1.

And thousands of end users now have access to socket can scanning and their apps bill.

Building out an installed base of users of our free version of soccer team is critical and.

And we made great strides on that front in Q1.

The early adopter App partners have been extremely positive about the ease of implementation and the instant value. It brings to their end users of their apps.

We're excited to announce that in the second quarter of 2023. These app users.

These app users who need to read damage to a more complex barcodes, we'll be able to upgrade from the free version to a more advanced version the socket can create 60.

On a monthly subscription basis through Apple's App store and good.

The play store.

This upgrade will allow our partners to support both cost conscience and feature cautions data capture requirements with the same application.

Enabling end users to select the best option based on their unique needs.

As customers upgrade to the socket <unk> 60.

This will provide socket mobile with recurring revenue stream each month.

So I became is being adopted and apps supporting a wide variety of industries and markets.

Delivery services feel the order entry in inventory apps just to name a few.

Our camera scanning opportunities.

Continue to move forward and we believe this is a critical step in the data capture journey. It will make us a more complete hardware and software data capture company.

In Q1, we also released our direct split.

Bluetooth barcode scanner for the iPhone in 2014.

Socket mobile Durst swayed models, combined <unk> and TD Bluetooth barcode scanning into.

Into a handheld durable case for iphones, creating a one handed solution for mobile workers.

Employers can now support workers using iPhone 14. In addition to older iphones all using the same chargers accessories, an SDK.

The engineering team has also been working hard to develop a new line of ultra rugged industrial products.

In Q2, we will be introducing a new extreme scan product lineups.

These products are targeted for harsh environments, such as manufacturing construction oil and gas and airports.

These new products will open new markets for socket mobile.

It also extend our reach within some of our current partner base.

This will also make us a more diversified sustainable and less dependent on retail.

We feel that our camera scanning and industrial products create new opportunities for socket mobile.

We can reach a larger and more diverse set of application providers and their end users.

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

Thanks, Dave. Thank you everyone for joining today's call during Q1, our revenue decreased by 31% to $4 $3 million.

I'm from $6 $3 million in the prior year quarter.

This was primarily due to inventory balancing activities among our distribution partners will have reduced their inventory levels to better align with demand and the lead times.

Ongoing supply chain disruptions.

As a result, our revenue has been impacted as our revenue is based on sales into distribution or <unk>.

Q1, gross margin was 48% down from 49, 7% in the prior year quarter. This.

This decrease was primarily due to the allocation of manufacturing overhead costs across lower production volumes.

In Q1, our operating expenses or $3 million, which is 13, 7% increase from the prior year quarter. This included an 18, 3% the increase in R&D expenses, driven by increased engineering services in the development of our new.

Products and your salary increases and the new hires.

Continue to invest to increase the co projects that drive the long term growth of the company.

During Q1, we recorded a net loss of $993000 or 12 cents per share compared to a net income of $340000 or <unk> <unk> per share in Q1 2022.

By the end of Q1 2023, we.

We had a cash balance of $3 million.

During the quarter, we invested $470000 in capital expenditures repurchased 93000 shares for $210000.

And the paid off $125000 in outstanding loan balances.

In terms of inventory, we ended the quarter with $5 $7 million, a slight increase from $5.

$6 million at the end of 2020 two.

Despite ongoing supply chain disruptions, we remain committed to managing our inventory levels effectively to deliver excellent customer service.

Furthermore, we are taking proactive steps to maintain a healthy liquidity position in the current and future business environment.

Our annual shareholder meeting will take place online on June 7th we invite all shareholders to cast their vote and to participate participated in the meeting.

This wraps up our prepared remarks, now I will hand, the call over to the operator for questions.

Erica.

Ladies and gentlemen, if you would like to ask a question. Please press star one on your phone now you'll be placed into the queue and Artur received please.

Please be prepare to ask your question when prompted once again to ask a question. Please press star one on your phone now.

Once again to ask a question. Please press star one on your phone now.

Our first question comes from Steve Swanson and Investor. Please state your question.

Can you give us an update on share repurchase program.

Yes.

Okay.

In total the company repurchased 369000 shares at a cost of slightly over a million dollars and their program expired at the end of March currently we don't have any a new program in place.

At this time, we have no further questions.

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

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

The host has ended this call goodbye.