Q2 2023 Socket Mobile Inc Earnings Call

Welcome to suck up Mobile Inc. Two 220 twenty-three earnings call.

My name is Paul 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 27, a of the Securities Act of 1933 as amended and section 21 E of the Securities and Exchange Act of 19.

34 as amended.

Such forward looking statements include but are not limited to statements regarding.

The 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 and which socket mobile sells its products.

Such statements involve risks and uncertainties.

An actual results could differ materially from the results anticipated and such forward looking statements because of a number of factors, including but not limited to the risks 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 risks that market acceptance and sales opportunities may not happen as anticipated.

The risks that sockets application partners and current distribution channels may choose not to distribute the products or may not be successful in doing so.

The risks that acceptance of sockets products and vertical application markets may not happen as anticipated.

As well as other risks described and 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 Linzo Chief Financial Officer.

Now turn the call over to Kevin Mills.

Mr Mills, you may begin sir.

Thank you up Rachel.

Afternoon, everyone and thank you for joining us today.

Q2 revenue was 5.1 million.

19% decrease compared to the 6 million in Q2 2022.

Gross margins were 51 point as compared to 50 points too and.

And we recorded an operating loss of $292000 compared to an operating income of $189000 in Q2 2022.

Q2 revenues were impacted by the global weakness of the retail clinic, a San Marcus.

Which remains a large source of revenue.

We saw general malaise and uncertainty the retail industry in North America during Q1 W.

We saw continue in Q2 and spread to other regions.

The world.

The economic uncertainty in various regions has resulted in delayed investments and deployment decisions.

Is a concern and outside our immediate control.

However, we do continue to gas the majority of the available business associated with iPad based point of sale solutions.

And believe we will benefits as the retail markets recover and strengthen based on our market needing product portfolio.

During cute too we made significant progress on our product development plans.

And we'll get many new products into the market in Q3.

Ah new products are designed for both with commercial services and industrial markets.

Which are currently more robust than retail.

In areas, where we feel our technology could have a long and meaningful impact over time.

In addition, they are.

Will reduce our dependency on the challenging retail sector.

Dave would provide more details on the products and potential impact in a few moments.

Q3 is going to be another challenging quarter.

As we expect retailed to remain weak and our new products will not have time to make a meaningful impact.

We do or believe the new products will be able to contribute to our queue for revenue and enable us to return to profitable operations.

But that said and now like to turn the call over to Dave Holmes Dave.

Thank you, Kevin and good afternoon, everyone.

Yeah, I'd like to highlight a few of the significant milestones we achieved in queue to talk a little bit more about some of the new products, we have coming up as we continue our journey, becoming a more comprehensive data capture company.

Engineering team.

It's been working hard to develop a new line ultra rugged industrial products.

In conjunction with Apple products.

We'll be introducing our new extreme skiing product line later this month.

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

Extreme scandal open new markets for soccer mobile.

It also extend our reach within.

All of our current partner base Ultra.

Ultimately.

I'll also make us a more diversified and sustainable.

And less dependent on retail.

Thank you too we continued to make significant.

Progress promoting our free camera base scathing as well.

R. At partners are updating their apps with the latest version of our capture S. D. K software to enable camera scanning was socket can.

Building out and installed base of users of our free versions of soccer, Kansas critical.

And thousands of App and users can <unk> can be captured data in the rash.

The early adopter at partners have been extremely positive about the ease of implementation and the instant.

Instant value it brings to the end users that their apps.

The next step expected to go live next month.

To enable these app end users need to read damaged or more complex barcodes.

To upgrade from the free version.

More advanced version.

<unk> M. C 860 on a monthly subscription basis to Apple's App store and Google play store.

This upgrade will lawyer at partners to support both cough sensitive.

Feature data capture requirements with the same application.

Billing and users to select the best option for their unique needs.

The customers upgrade ask customers upgraded to soccer, Kansas 860.

This will provide soccer mobile with the recurring revenue stream each month.

<unk> was being adopted in apps.

Wide variety of industries and market sectors.

Delivery services feel the ordinary entry.

England for Ya and inventory anxious today Miss you examples.

Okay and was getting continues to move forward.

We believe this is a critical step data capture journey it.

It makes us a more complete hardware and software data capture company.

We feel that our campus scanning.

And industrial products create new opportunities for soccer modal.

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

<unk>.

Capture SDK with also updated to include support for socket scanned S 370, combo, NFC and QR code reader.

The socket scan S 550.

N S T mobile wallet reader writer.

As well.

This will ensure that our development partners can incorporate some of the new features expected in Iowa 17.

Seated with personal identification.

Advances in NFC portfolio physician socket mobile.

At the forefront of emerging digital Ivy and multiple drivers license markets.

This will enable new apps new markets.

And you end users for.

For soccer mobile.

Also socket sockets gave us like 50 has been awarded stomach a certification.

<unk> is a contactless or if I D smartcard technology developed by Sony in Japan.

Used for convenient payment.

T Transit digital I D and other quick contact those transactions.

This certification make socket skin is 550 compatible with the focus system used in multiple regions and countries around the world include.

Including Japan, Bangladesh, Hong Kong, India, Indonesia, Vietnam, and many others.

Alright, let's see portfolio is well positioned in the space is it starts picking up steam.

Perceive the need for digital I E.

[noise] driver's license another contactless reader infrastructure.

Having an impact on our revenue in 2024 and beyond.

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

Mmm. Thank you everyone for gang, Okay, bad cough, and Q2, <unk> 5.1, Mary <unk>, 19% decrease compared to the same corner in their previous here.

<unk>, we can surf the primary source album revenue.

Maybe I can ask one compared to Q1 Keeter Avenue displayed taken per cent increase.

That's a cute one revenue has been impacted by any kind of balancing activity conducted goodbye Alec explanation of Pat nurse.

I'll keep <unk> shown an improvement reaching 51.8%, we can <unk> at 1.6% increase compared it to the same period last year.

And then 3.7% increase compared to Q1.

The improvement and key to all of our queue line.

Only actually they can get you a more efficient allocation of overhead costs <unk>.

Compare sent to the same period in the previous year that info <unk> into two I typically I go to a higher making Ah keep the <unk> from our online store.

And Q2 are operating expenses or 2.9 <unk> dollars.

Reflecting a three per cent increase compared to the same quota in the previous year.

Three per cent decrease from the time for him.

During this period the company.

Company monitor and control the expensive one.

Continuing to exactly in critical packet.

The longterm growth of the company.

You too.

According to a net loss of $535 or six cents per share <unk> two in that income of $1000.

$97 for one cent per share in the same period in white black here.

Thank you to our EBITDA with 20, $30000, a decrease compared to two $630000 in the same corner previous here, but an improvement from unedited find $867 and the prior corner.

Hold on noncash expenses and key too which include depreciation and amortization activate the compensation expenses and income pack among 82 $695.

As of June 30th our cash balance and what's the $3.4 million.

$25 an hour compared to December 31st 2022.

A six month period we.

We completed the $1.6 million convertible financing.

Stock option exercises contributed an additional $25 to our cash position.

Primary expenditure during this period included.

$1.1 million in capital expenditure.

$100000 for operating activities.

$7 for sure by Mac, and you'll get loan repayment plan you're $25000.

In terms of inventory.

And I think that corner with $5.5 million.

A slight decrease from $5.6 million at the end of 2022.

<unk> I'll prepare giving Morris.

Now I'll have to call over to the I'll take care for questions.

If you would like to ask a question. Please press star one on your telephone keypad now you'll.

You'll be placed into the queue in the order received.

Be prepared to ask a question when prompted.

Once again, if you have a question. Please press star one on your phone now.

And our first question comes from Chris <unk> from singular research.

Your line is open.

Yes, Hi, good afternoon had a question on the gross margin improvement what were the main drivers there and what can we expect for the third quarter and the fourth quarter.

So would you like to answer that.

Yeah.

For the.

They're implemented in compared it to two one with me <unk>, you know <unk> <unk> <unk> <unk> <unk> overhead allocation.

<unk>.

Hey, you know has been.

Alright.

Alright, Alright, I got higher number of units.

<unk> keeps your last year.

We our address sandwiches through our online shopping store has been increased has been.

How about I can ask you I have a 97% of our revenue from online store in Michigan.

That increase it to 16%.

Alright, Alright does sandwiches to add M. S. R. P that helps with the American in in case, you <unk> your last year.

And we expect it there.

From our online store will continue to increase.

Okay. Thanks for that and then.

Wanted to get some idea on what.

What you guys are seeing in the in the industrial sector as far as.

With your new products like the <unk> scan, where DW 930.

What sort of demand are you seeing for this and how can we anticipate.

This affecting revenue going forward you know what what is the market here.

Well, Okay, let me say that our business model is that we are dependent on apps developed by third parties.

So we don't expect these products to have instant.

Revenue impact and what we do C. T is people adopting them into their applications and then as they get deployed we do C dash increased revenue.

We're entering into the retail industry.

<unk> space and we have a lot of interest and we already have a number of apps that will instantly support at the products, we bring to market in Q3.

Eight Q3 will primarily be.

Understanding that the products meet the needs that they perform well in the real world.

I am going through a series of pilots with a larger customers and then seeing deployments starting maybe towards the end of the queue for but primarily in 2024.

We we.

We believe that the.

Industrial Marcus is.

Very.

Underserved for Apple based products and some of the products. We bring will allow people to use apple products in these more ruggedized environments, and we think it will have a significant impact on our revenue going forward, but we'd like to get those.

Those trials under our belt and make sure everything is stopped breathing as we expect before we actually put out what do you think would be our expectations on a quarterly basis.

Okay, great. Thanks for all your answers.

Thanks, Chris.

And as a reminder, if you do have a question. Please press star one on.

On your phone though.

And so you have no further questions I'll turn the call back over to our house.

Thank you pleasure I'd like to thank everyone for participating in today's calls and wish you all good afternoon. Thank you.

The meeting has now concluded thank you for joining and have a pleasant day.

The house has ended this call.