Q2 2024 Socket Mobile Inc Earnings Call

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Operator: Welcome to the Socket Mobile, Inc. Q2 2024 earnings call. 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. 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 the manufacture of Socket's 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 may not happen as anticipated, and the risk that The risk that acceptance of Socket's products in vertical application markets may not happen as anticipated.

Operator: Welcome to Socket Mobile Inc.

Speaker Change: Welcome to the socket Mobile Inc, Q2, 2024 earnings call.

Operator: Q2, 2024 earnings call. My name is Jen, and I will be your operator for today's call.

My name is Jen and I will be your operator for today's call.

Operator: 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 collections 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. 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 Socket's 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.

Speaker Change: Before we begin I would 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 1933 as amended and section 21 E of the Securities and Exchange Act of 1934 as amended such.

Speaker Change: Such forward looking statements include but are not limited to statements.

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: The risks that manufacture of sockets products may be delayed or got rolled out as predicted due to technological market or financial factors, including the availability of product components and necessary working capital.

Operator: The risk that market acceptance and sales opportunities may not happen as anticipated. The risk that Socket's application partners and current distribution channels may choose not to distribute the products or may not be successful in doing so. The risk that acceptance of Socket's products in vertical application markets may not happen as anticipated, as well as other risks described in Socket's 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.

Speaker Change: The risk that market acceptance and sales opportunities may not happen as anticipated.

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

Speaker Change: The risk that acceptance of sockets products and vertical application markets may not happen as anticipated.

Speaker Change: As well as other risks described in sockets. Most recent Form 10-K, and 10-Q reports filed with the Securities and Exchange Commission.

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

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

Operator: On the call with me today are Kevin Mills, Chief Executive Officer; Dave Holmes, Chief Business Officer; and Lynn Zhao, Chief Financial Officer. I will now turn the call over to Kevin Mills. Kevin, you may begin. Good afternoon.

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

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

Speaker Change: I'll now turn the call over to Kevin Mills.

Speaker Change: Kevin Mills, you may begin.

Kevin Mills: Thank you, operator.

Kevin J. Mills: Thank you operator.

Kevin J. Mills: Good afternoon, everyone, and thank you for joining us. Well, we were pleased with our operational performance during the quarter, as we maintained our focus on promoting and demonstrating our newer products. We launched our newer products late, and feedback has been very positive. I would now like to turn the call over to Dave Holmes, who will provide a more detailed update on our progress. Dave.

Kevin Mills: Good afternoon, everyone, and thank you for joining us today. Our Q2 revenue was $5.1 million, a 0.7% decrease compared to $5.1 million. Q2. 2 million from Q2. 2023. In Q2.2023, in Q2.2024, we were either the positive.

Kevin J. Mills: Good afternoon, everyone and thank you for joining us today.

Speaker Change: Our Q2 revenue was $5 1, million% to 0.7% decrease compared to 512 million from Q2 2023.

Speaker Change: In Q2 2023.

Speaker Change: In Q2, 2024, we were EBIT positive.

Kevin Mills: Overall, Q2 was a difficult quarter in the challenging economic climate. We were pleased with our operational performance during the quarter, as we maintained our focus on promoting and demonstrating our new products. We launched our new products in late 2023 and early 2024, and initial deliveries have been made. The back has been very positive.

Speaker Change: Overall, Q2 was a difficult quarter and the challenging economic climate as well.

Speaker Change: We are pleased with our operational performance during the quarter as we maintained our focus on promoting and demonstrating our newer products.

Speaker Change: We launched our newer products and lays.

Speaker Change: 2023 in early 2024 and initial deliveries have been made.

Speaker Change: <unk> has been very positive.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: The customer to make a meaningful contribution to our revenue.

Dave Holmes: I would now like to turn the call over to Dave Holmes, who will provide a more detailed update on our progress. Thank you, Kevin. Good afternoon, everyone. As Kevin said, today I'd like to talk about the progress we were making with our newer products and strategic initiatives and highlight a few of the significant milestones that we achieved in Q2. Our investments in innovation are helping transform Socket Mobile into a more comprehensive data capture company. We're seeing good traction with our extreme scan military grade industrial scanners as well as our wearable products. These products were built for the industrial market scanning market, facilitating the use of iPhones and iOS applications in rugged work environments.

Speaker Change: I would now like to turn the call over to Dave Holmes, who will provide a more detailed update on our progress.

Speaker Change: Okay.

David A. Holmes: Thank you, Kevin and good afternoon, everyone.

David A. Holmes: As Kevin said, today I'd like to talk about the progress we are making with our newer products and strategic initiatives and highlight a few of the significant milestones that we achieved in Q2. Our investments in innovation are helping transform Socket Mobile into a more comprehensive data capture company. We're seeing good traction with our Xtreme Scan military-grade industrial scanners, as well as our wearable products. We recently announced our latest addition to the family, the XG640, specifically designed for the transportation and logistics market.

David A. Holmes: Kevin said today I'd like to talk about the progress, we're making with our newer products and strategic initiatives.

David A. Holmes: A few of the significant milestones that we achieved in Q2.

Speaker Change: Our investments in innovation are helping transform socket mobile into a more comprehensive data capture company.

Speaker Change: We're seeing good traction with our extreme scan military grade industrial scanners, as well as our wearable products.

Speaker Change: Products were built for the industrial market and scanning market facilitating the use of iphones that iOS applications and rugged work environments.

Dave Holmes: We recently announced our latest addition to the family, the XG640, specifically designed for the transportation and logistics markets. Our unique design was built for BYOD, or bring your own device. Delivery drivers can use their own mobile device for communication, navigation, or photos, and instantly connect to Extreme Scan to enable high performance barcode scanning. We think it's perfect for small and medium sized delivery operations, which often use independent drivers. Workers love it because they no longer have to carry multiple devices. These product families represent a significant milestone in our commitment to delivering high quality data capture solutions for our customers and industrial manufacturing, warehousing, transportation, energy, and airports.

Speaker Change: We recently announced our latest edition to the family Xg $6 40.

Speaker Change: Specifically designed for the transportation and logistics markets.

David A. Holmes: Our unique design was built for BYOD, or bring your own device. Delivery drivers can use their own mobile device for communication, navigation, or photos and instantly connect to Xtreme Scan to enable high-performance barcode scanning. We think it's perfect for small and medium-sized delivery operations, which often use independent drivers.

Speaker Change: Our unique design was built for B Y O D or bring your own device delivery drivers can use their own mobile device for communication navigation with photos and instantly connect to extreme scan to enable high performance barcode scanning.

Speaker Change: Think it's perfect for small and medium sized delivery operations, which often use independent drivers.

David A. Holmes: Workers love it because they no longer have to carry multiple devices. These product families represent a significant milestone in our commitment to delivering high-quality data capture solutions for our customers in industrial, manufacturing, warehousing, transportation, energy, and airports. Extreme scan is designed to enable iPhones to withstand harsh industrial conditions and offer robust scanning capabilities with ultimate durability.

Speaker Change: Workers' Love it because they no longer have to carry multiple devices.

Speaker Change: These product families represents.

Speaker Change: A significant milestone in our commitment to delivering high quality data capture solutions for our customers and industrial manufacturing warehousing transportation energy and airports <unk>.

Dave Holmes: Extreme Scan is designed to enable iPhones to withstand harsh industrial conditions and offer robust scanning capabilities with the ultimate durability. It opens the door into new customer segments in the massive rugged eyes computing space that demand the ultimate performance in the most difficult environments. In Q2, we saw several marquee customers putting these new products through rigorous testing. We passed some of the most intense testing with flying colors. Many of these customers are now moving into proof of concept and pilot projects to put the devices into the hands of the front line workers. We expect to move into deployments later this year, and we expect these products to begin to contribute to our revenue in Q4 and in 2025.

Speaker Change: Extreme Stan is designed to enable iphones to withstand harsh industrial conditions and offer robust scanning capabilities with the ultimate durability.

David A. Holmes: It opens the door to new customer segments in the massive, ruggedized computing space that demand the ultimate performance in the most difficult environments. In Q2, we saw several marquee customers putting these new products through rigorous testing, and we passed some of the most intense testing with flying colors.

Speaker Change: It opens the door into new customer segments, and the massive ruggedized computing space and demand in the ultimate performance and the most difficult environments.

Speaker Change: In Q2, we saw several marquee customers, putting these new products through rigorous testing we pass some of the most intense testing with flying colors.

David A. Holmes: Many of these customers are now moving into proof of concept and pilot projects, putting the devices into the hands of frontline workers. We expect to move into deployments later this year, and we expect these products to begin to contribute to our revenue in Q4 and into 2025. We've also made significant progress in promoting our camera-based scanning technology. Our early adopter app partners have integrated SocketCam into their platforms, enabling their customers to scan barcodes directly into their apps using the mobile device camera.

Speaker Change: Many of these customers are now moving into proof of concepts and pilot projects to put the devices into the hands of the frontline workers.

Speaker Change: We expect to move into deployments later this year and we expect these products to begin to contribute to our revenue in Q4 and into 2025.

Dave Holmes: We've also made significant progress in promoting our camera-based scanning technology. Our early adopter app partners have integrated Socket Cam into their platforms, enabling their customers to scan barcodes directly into their apps using the mobile device camera. The free subscription version of socket cam enable our app partners to serve all their diverse and user needs from the most cost conscience with our free socket cam C820 to a more feature rich capture requirements with our subscription based socket cam C860. And the most intense users can still access our rare hardware handheld scanners. All of these are made available to our app partners' ecosystem with a single, simple, and free integration of our capture SDK.

Speaker Change: We've also made significant progress in promoting our camera based scanning technology.

Speaker Change: Our early adopter App partners have integrated socket Kim into their platforms, enabling their customers to scan barcodes directly into their apps using the mobile device camera.

David A. Holmes: The free subscription version of SocketCam enables our app partners to serve all their diverse end-user needs, from the most cost-conscious with our free SocketCam C820 to a more feature-rich capture requirement with our subscription-based SocketCam CH-6, and the most intense users can still access our array of hardware handheld scanners. All of these are made available to our app partners ecosystem with a single, simple, and free As adoption builds, and end users upgrade to the SocketCam C860, this will generate a recurring revenue stream for us each month.

Speaker Change: The free subscription version of socket can enable our partners to serve all of their diverse end user needs from the most cost conscience with our free socket Kim <unk> 22, a more feature rich.

Speaker Change: <unk> requirements.

Speaker Change: With our subscription based socket can see 860.

Speaker Change: And the most intense users can still access our array of hardware handheld scanners.

Speaker Change: All of these are made available to our App partners ecosystem with a single simple and free integration of our capture SDK.

Dave Holmes: As adoption builds and end users upgrade to socket cam C860, this will generate a recurring revenue stream for us each month. Our new extreme scan products will extend our reach and diversify our customer base and allow us to enter the large rugged eyes mobile computing market. Socket cam opens the door for Socket Mobile to have a recurring revenue stream each month for software subscription. Solutions. Ultimately, these initiatives will allow us to become a more diversified, sustainable, and less dependent on retail. We're evolving into a more complete hardware and software data capture company.

Speaker Change: As adoption builds an end user's upgrades in socket <unk> 60, this will generate a recurring revenue stream for us each month.

David A. Holmes: Our new Xtreme Scan products will extend our reach and diversify our customer base and allow us to enter the large, ruggedized mobile computing market. SocketCam opens the door for SocketMobile to have a recurring revenue stream each month for software subscriptions. Ultimately, these initiatives will allow us to become a more diversified, sustainable company, less dependent on retail. We're evolving into a more complete hardware and software data capture company

Speaker Change: Our new extreme scan products will extend our reach and diversify our customer base and allow us to enter the large ruggedized mobile computing market.

Speaker Change: Socket gym opens the door for socket mobile to have a recurring revenue stream each month for software subscriptions.

Speaker Change: Ultimately these initiatives will allow us to make.

Speaker Change: To become a more diversified sustainable and less dependent on retail.

Speaker Change: We are evolving into a more complete hardware and software data capture company.

Lynn Zhao: With that, we'll turn it over to Lynn for more details on our financial results. Lynn? Okay, thanks, Dave.

Speaker Change: With that I'll turn it over to Lynn for more details on our financial results.

Lynn Zhao: Thanks, Dave. Thank you, everyone, for joining today's call. Our Q2 revenue was approximately $5.1 million, similar to the prior quarter and the previous quarter. Our channel inventory level was at $2.65 million, an increase from $2.1 million on March 31. The reserve rate for returns, however, decreased from 44% to 22.3%, resulting in an increase of $320K revenue during Q2. We have maintained our gross margin of over 50 points. In Q2, our gross margin was 50.9%, compared to 51.8% in the prior year's quarter and 50.3% in the preceding quarter.

Lynn Zhao: Okay. Thanks, Dave. Thank you everyone for joining today's call. Our Q2 revenue was approximately $5 one many similar to the prior year quarter ended the previous quarter.

Lynn Zhao: Thank you, everyone, for joining today's call. Our Q2 revenue was approximately 5.1 million, similar to the prior quarter and the previous quarter. Our channel inventory level was at 2.65 million, increased from 2.1 million on March 31. The reserve rate for returns, however, decreased from 44% to 22.3%. Resulting in an increase of 320k revenue during Q2. We have maintained our growth margin of over 50.50 points. Yeah, in Q2, our growth margin was 50.9% compared to 51.8% in the prior year's quarter and the 50.3% in the preceding quarter. Operating expenses for Q2 totaled $3.1 million, a 6% increase compared to the same period last year, and a 4% increase over the previous quarter.

Lynn Zhao: Our channel inventory level was at 2.65.

Speaker Change: <unk> increased from $2 1 million on March 31st there.

Speaker Change: Reserve grade if our returns however decreased from 44% to 22.3%, resulting in a increase of 320 K revenue during Q2.

Speaker Change: We have maintained our gross margin of over 50 point 50 point, yes in Q2, our gross margin was 59% compared to 51, 8% in the prior years quarter and 53% in the preceding quarter.

Lynn Zhao: Operating expenses for Q2 totaled $3.1 million, a 6% increase compared to the same period last year and a 4% increase over the previous quarter. This rise is primarily attributed to cost of living salary adjustments implemented at the start of Q2.

Speaker Change: Operating expenses for Q2 totaled $3 $1 million, a 6% increase compared to the same period of last year, and a 4% increase over the previous quarter.

Lynn Zhao: This rise is primarily attributed to cost of living salary adjustments implemented at the start of Q2. During Q2, we recorded a net loss of $600 in $8,000 or $8 per share compared to a net loss of $513,000 or 6 cents per share in Q2 2023 and the loss of $557,000 or 7 cents per share in Q1 2024. Similar to Q1, Q2. Ebada was a break even at $8 compared to $234,000 in Q2. 2023. Total non-cash expenses, including depreciation, amortization, and the equity expenses, are $543 in Q2. 2024. Our cash balance decreased to $2.1 million at the end of Q2 from $2.8 million at the end of both 2023 and Q1.

Lynn Zhao: Right.

Lynn Zhao: Primarily attributed to cost of living salary adjustments implemented at the start of Q2.

Lynn Zhao: During Q2, we recorded a net loss of $608,000, or $0.08 per share, compared to a net loss of $513,000, or $0.06 per share, in Q2 2023, and a loss of $557,000, or $0.07 per share, in Q1 2024. Similar to Q1, Q2 EBITDA was a breakeven at $8,000, compared to $234,000 in Q2 2023. Total non-cash expenses, including depreciation, amortization, and equity expenses, were $543,000 in Q2 2024. Our cash balance decreased to $2.1 million at the end of Q2 from $2.8 million at the end of both 2023 and Q1. Q2 spending includes $540,000 in operating activities and $110,000 in capital expenditures.

Speaker Change: During Q2 later reported a net loss of $608000 or <unk> <unk> per share.

Speaker Change: <unk> to a net loss of $513000 or six cents per share in Q2 2023.

Speaker Change: And the loss of the $557000 or seven cents per share in Q1 2024.

Speaker Change: Similar to Q1 Q2, EBITDA was at breakeven at $800 compared to $234000 in Q2 2023.

Speaker Change: Total noncash expenses, including depreciation and amortization and the aggregate expenses are $543000 in Q2 24.

Speaker Change: Our cash balance decreased to $2 $1 million at the end of Q2 from $2 $8 million at the end of both 2023.

Speaker Change: And the Q1 Q2 spending includes 540 K found dollars in operating activity and $110000 in capital expenditures.

Lynn Zhao: Q2 spending includes $540K in operating activity and $110K in capital expenditures. We reduced our inventory from $5.4 million at the end of both 2023 and Q1 to $5.2 million.

Lynn Zhao: We reduced our inventory from $5.4 million at the end of both 2023 and Q1 to $5.2 million. This wraps up our prepared remarks. Now I will hand the call over to the operator for questions. Thank you.

Speaker Change: We reduced our inventory from $5.4 million at the end of both pun 73, and the Q1 to $5 $2 million.

Lynn Zhao: This wraps up our prepared remarks.

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

Operator: Now, I will hand the call over to the operator for questions. Thank you, operator. If you would like to ask a question, please press star 1 on your telephone keypad now. You'll be placed into the queue in the order received. Please be prepared to ask your question when prompted. Once again, if you have a question, please press star 1 on your phone now. And once again, that star 1. If you would like to ask a question.

Speaker Change: Thank you operator.

Operator: If you would like to ask a question, please press star 1 on your telephone keypad now. You'll be placed in the queue in the order received.

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

Speaker Change: You will be placed into the queue in the order received.

Operator: Please be prepared to ask your question when prompted. Once again, if you have a question, please press star 1 on your phone now. And once again, that's star one, if you would like to ask a question. And it appears there are no questions at this time, Mr. Mills, so I'll turn the conference back to you.

Speaker Change: Please be prepared to ask your question when prompted.

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

Speaker Change: And once again Thats star one if you would like to ask a question.

Speaker Change: Okay.

Operator: It appears there are no questions at this time.

Operator: And it appears there are no questions at this time Mr Mill, So I'll turn the conference back to you.

Kevin Mills: Mr. Mills, I'll turn the conference back to you. Thank you, operator, and thank you everyone for joining us today, and wish you all a good afternoon.

Kevin J. Mills: Thank you, operator, and thank you, everyone, for joining us today. I wish you all a good afternoon. Goodbye.

Kevin J. Mills: Thank you operator, and thank you everyone for joining us today and wish you all a good afternoon.

Operator: Goodbye. And this concludes today's conference call. Thank you for attending.

Speaker Change: Goodbye.

Operator: And this concludes today's conference call. Thank you for attending. The host has ended this call.

Speaker Change: And this concludes today's conference call. Thank you for attending.

Operator: The host has ended this call.

Speaker Change: The host has ended this call goodbye.

Operator: Goodbye.