Q1 2025 Data I/O Corp Earnings Call
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Speaker Change: Good afternoon, and welcome to the data I O first quarter 2025 financial results Conference call.
Speaker Change: All participates at participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note. This event is being recorded I would now like to turn the conference over to Mr. Jordan Darrow Investor Relations. Please go ahead Sir.
Speaker Change: Thank you operator, and welcome to the data I O Corporation first quarter 2025 financial results Conference call with me today are the company's President and CEO, Bill, one worth and Chief Financial Officer, and Vice President Gerald and beef.
Speaker Change: Before we begin I'd like to remind you that statements made in this conference call concerning future events results from operations financial position markets economic conditions supply chain expectations estimated impact of tax and other regulatory reform product releases, new industry participants and.
Speaker Change: And any other statements that may be construed as a prediction of future performance or events are forward looking statements, which involve known and unknown risks uncertainties and other factors, which may cause actual results to differ materially from those expressed or implied by such statements.
Speaker Change: These factors also include uncertainties as to the impact of global and geopolitical events International trade regulations.
Speaker Change: Order levels for the company and the activity level of the automotive and semiconductor industry overall ability.
Speaker Change: The ability to record revenues based on the timing of product deliveries and installations market acceptance of new products.
Speaker Change: And economic conditions and market demand parts shortages pricing and other activities by competitors and other risks, including those described from time to time in the company's filings on forms 10-K and.
Speaker Change: Thank you with the Securities and Exchange Commission press releases and other communications.
Speaker Change: Curious he and completeness of forward looking statements should not be unduly relied upon data I always under no duty to update any forward looking statements and now I'd like to turn the call over to Bill Wentworth, President and CEO of data <unk>.
Jordan Darrow: Jordan. Thanks, a lot. Thank you for the people joining on the call. It's always great to get a great audience. So looking forward to some questions after the call as well.
Speaker Change: We're pleased to announce a date or a team has reversed the 'twenty 'twenty four trends with revenues coming in at $6 2 million up 19% over the previous quarter, three four bookings up $4 six up 11%.
Jordan Darrow:
Jordan Darrow: As we're all aware of the tariff discussion has been front and center since the beginning of March.
Jordan Darrow: You know it has had obviously everybody read the headlines and we use the native has had some.
Jordan Darrow: Now, let's say stalling some investments may be sitting on some of those decisions.
Jordan Darrow: We are constantly communicating with our customers a weekly almost in some cases daily because there are some orders that we've been tracking since the beginning of the year I would say you know Asia was off to a slow start.
Jordan Darrow: That was really due to kind of a late Chinese new year. This year, but also you know they had a pretty good year last year looking at their forecast for this year, we still see them holding again, you know terrorists are going to play a big role in that you know depending on how those go well dictate some of that will get into.
Jordan Darrow: And any questions around tariffs definitely in the open questions. We're very prepared to talk about how we're getting around those issues in the supply chain. The team has done a phenomenal job really put them together various different pathways to still be able to deliver product and not have a major major tariff impact.
Jordan Darrow:
Jordan Darrow: The.
Jordan Darrow: Next would be really some several announced that we'll be making over the next two to three quarters and this really comes from the last six months of discovery work really looking through our technology platform and programming platform. We do have a new product roadmap that will be rolling out they'll be very detailed in the next the next quarter or two.
Jordan Darrow: Strategic investments for growth and productivity improvements.
Jordan Darrow: The other notable thing a little lax are literally six eight weeks has been our discussions with semiconductor companies will be talking about this and probably by the end of Q2 some of the strategic relationships that we're forging with these companies and this is something data or how did years ago and I will tell you the conversations have been.
Jordan Darrow: White substantial and quite fruitful and it was really kind of set us up for real good growth in and being able to be that recommended partner technology partner for the semiconductor houses that produce program will technologies.
Jordan Darrow: Diversity and customer segments, you know, we've talked a lot about in the past automotive and Iot.
Jordan Darrow: Interesting in some geos those plays those those two verticals, especially automotive or stronger than than you would expect given what's going on around the world, especially domestically, whereas such in China, we have domestic manufacturing in mainland China, which that's one of the areas like such as their EV market has remained fairly.
Jordan Darrow: Strong.
Jordan Darrow: Customer diversity in segments, such as industrial service provider networks, which would be franchise distribution.
Jordan Darrow: We haven't really gone to to those markets to strong yet because we're developing new products that will fulfilled their product needs, but the technologists that they sell and we see that coming in the coming quarters.
Jordan Darrow: Coming off the I T C apex show in March are we refreshed our manual product line introduced the new lumen X M. A N. The flash for three and four these are really reskins of existing technology, but adding some software to make it more functional and within engineering departments I will say it was the best.
Jordan Darrow: Trade show, we've had in apex 2013. It was it was it was a really what what really was great to see was just the activity around our booth and we had our competitors within line of sight of our food and qualified leads were up 39%, which this is based on flat attendance from last year.
Jordan Darrow: No new contacts were up 18% from 2024. These are just great metrics and it really it really brought to light. The car you know the consultative discussion, we're having around the whole supply chain for how your program parts, how you manage the technology.
Jordan Darrow: You know how you move from engineering to production to final inspection to a rework of products that may come back for free work. So we believe this although a small sample we believe that this consultative approach will be.
Jordan Darrow: A big part of our growth engine in the future. It was it certainly made its mark there.
Speaker Change: I'd like to turn the discussion over to Jerry Yang and talk about our financial results.
Jerry Yang: Thank you Bill and good day to everyone.
Speaker Change: I look forward to outlining and elaborating on our recent financial performance in more detail.
Speaker Change: My comments today will focus on key points of interest for the first quarter of 2025, and our perspective looking forward.
Speaker Change: Our recent performance has been impacted by positive business strategy and go to market changes, which Phil alluded to earlier, however that was offset by recent economic headwinds created by of course tariffs and trade uncertainty.
Speaker Change: Despite these recent challenges we saw quarterly revenue and profitability improvement.
Speaker Change: On a sequential.
And year over year basis.
Speaker Change: Net sales in the first quarter were $6 2 million.
Speaker Change: <unk> 1 million or 19% from $5 2 million in the fourth quarter of 2024.
Speaker Change: And then an increase of $100000 from $6 1 million in the first quarter of 'twenty 'twenty four.
Speaker Change: The improvements were driven by business recovery.
Speaker Change: And backlog deliveries in the Americas and Europe.
Speaker Change: Well if growth from the prior period, a 32% and 44% respectively for again, our Americas and European market.
Speaker Change: Asia revenue did decline, 40% due to a strong prior year performance.
Speaker Change: Current quarter business pushout.
Evolving trade tariffs.
Speaker Change: As well as economic uncertainties.
Automotive electronics.
Speaker Change: Primary business segment represented 66% of our first quarter 'twenty, five Bolton compared with 59% for all of 2024.
Speaker Change: Consumables consumable adapters and services remained steady.
Speaker Change: Representing 46% of total first quarter revenue and providing a stable base of recurring revenue.
Speaker Change: Moving on to new bookings.
Speaker Change: Babies were strong at the start but did slow at the end of the first quarter as.
Speaker Change: As customers delayed purchase decisions due to economic trade and tariff concerns, particularly in Asia.
Speaker Change: Our first quarter 'twenty five bookings were $4 6 million up from $4 1 million in the fourth quarter of 2024, but it was down from 8 million in the first quarter of 2024, a year ago due to last year's large 2.8 million dollar contra.
Speaker Change: <unk> from a single customer for multiple assistance deliveries that.
Speaker Change: We have been pre.
Speaker Change: Providing delivering on over the course of the last six months.
Speaker Change: Backlog at the end of the first quarter was $2 9 million down 600.600 million I'm sorry from December 31st.
Speaker Change: Moving onto gross margin as a percentage of sales was 52% in the first quarter of 2025 and comparable to the 53% achieved in the full year 2024.
Speaker Change: The slight decrease in gross margin percentage for the current quarter, primarily reflects a higher mix of system revenue.
Speaker Change: And lower inventory levels and the associated spending absorption.
Speaker Change: More importantly, direct material costs remained steady and consistent with prior periods.
Speaker Change: Looking forward looking forward planning and actions are underway as bill indicated to mitigate the impact of new tariffs trade and inflection inflationary pressures.
Speaker Change: Leveraging our domestic and international production and service capabilities.
Speaker Change: Potential actions under consideration include ship.
Speaker Change: Shifting material sourcing product.
Speaker Change: New factory and shipment logistics just to name a few.
Speaker Change: Operating expenses for the first quarter were $3 6 million down $427000 or 11% from the fourth quarter.
Speaker Change: And down $515000 or 12 for 12% from the prior year period.
Speaker Change: Fourth quarter announced changes last fourth quarter announced changes well staff reductions and related.
Speaker Change: Charges.
Speaker Change: Did contribute to approximately $300000 of expense savings in the first quarter of 2025.
Speaker Change: And those savings are expected to continue into the remaining year of course are allowing the business to redeploy those resources that's necessary.
Speaker Change: Our first quarter operating expenses, which are typically higher than other quarters of the year also it did include public company costs pertaining to audit regulatory fees and NASDAQ fees at approximately 300000.
The company incurred a net loss of $382000 for the first quarter.
Speaker Change: Compared to a net loss of $1 2 million in the fourth quarter of 2024.
Speaker Change: And a loss of 807000 for the prior year period.
Speaker Change: The improvement in the first quarter net loss reflects of course higher revenue.
Speaker Change: And lower operating expenses, which were partially offset by again onetime annual public company expense in Q1.
Speaker Change: Adjusted EBITDA, which may be a good proxy for cash.
Speaker Change: For the first quarter was nearly breakeven.
Speaker Change: We had a loss of 98000.
Speaker Change: Compared to a loss of 364000 for the prior year period.
Speaker Change: Using that to transition to the balance sheet, we continue to maintain a healthy cash position.
Speaker Change: We ended the first quarter of web access.
Speaker Change: $10 5 million in cash.
Speaker Change: Yep.
Speaker Change: 159000 from the $10 3 million on December 31st 2020 for.
Speaker Change: The increase in cash reflects higher sales.
Speaker Change: And improve and continue improvement in our cost structure.
Speaker Change: And lower inventory levels again, partially offset by higher cash expense related to our.
Speaker Change: Annual first quarter expenses for public company activities.
Speaker Change: Data I'll net working capital of over 16 million on March 31st.
Speaker Change: <unk> remained relatively flat compared to the beginning of the year.
Speaker Change: Company continues to have no debt.
Speaker Change: While we remain cautious for the second quarter.
Speaker Change: Our entire team and channel partners and remain focused on driving sales improvement.
Speaker Change: By leveraging our new go to market and product strategies, which still had alluded to and will continue to expand on it.
Speaker Change: Despite the current tariff trade and inflationary pressures, we believe we have the talent experience.
Speaker Change: And financial capacity to navigate these challenges.
Speaker Change: This concludes my remarks for the first quarter of 2025.
Speaker Change: Operator.
Speaker Change: Please start the Q&A process.
Speaker Change: Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your keypad, if youre using a speakerphone. Please pick up your device before pressing the keys.
Speaker Change: A J your question at any time, you May Press Star then two.
David Marsh: Today's first question will come from David Marsh with singular research. Please go ahead.
David Marsh: Hey, guys. Thanks for taking the questions and congrats on the improvement this quarter.
Speaker Change: Thank you David.
David Marsh: So.
David Marsh: First question is just around revenue mix I mean are you.
David Marsh: Typically it's kind of a wait for the Oh wait till their SEC filing, but could you just provide a little bit of color on revenue mix between capital equipment adapters and software in the quarter and how it may compare to prior year.
Speaker Change: Yes in the prior year, 'twenty 'twenty, four or mix of what we call recurring and reoccurring revenue was about 50% and that is made up of both adaptors revenue as well as service contracts software and things of that nature.
For the Q4, our recent Q1, our recurring revenue mix was 46%. So they actually decreased by four percentage points. However, that's a good thing because our overall revenue increase was driven to a large extent by the fact that we were able to secure and deliver more systems and supplies.
Speaker Change: It resolves the overall mix does shift a little bit, but again, we are still very.
Happy with our recurring revenue base because that is of course.
Speaker Change: That's stable base kind of going forward and I would say to add to Jerry's comments is that you know Q1, we shipped about $2 million worth I think sockets for us too.
Speaker Change: That was up over Q1 of last year. So the trend for all of last year I think we're about 7.4 somewhere in that sort.
Speaker Change: So the trend if we continue to do this trial and I do believe that we'll continue we see some activity coming in systems that we've newly shipped usually those new systems on the ship you'll see follow on orders large orders of adaptors, So where we're in communication about that and you know probably will be able to communicate that at the end of <unk>.
Speaker Change: You too so yeah. The consumables are a big indicator of where we go things like sockets adapters, we track now daily Arizona and active.
Speaker Change: Dashboard that the wholesales team can see and finance can see these are some of the changes we made internally just to be able to view through our lens. What are the important indicators to drive the business and that's really concerned to adapters and device requests because those two are basically an indicator of how much of your platform is being used.
Speaker Change: As it's consumed.
Speaker Change: Got it got it that's really helpful. And then just transitioning to the expense side.
Speaker Change: Yeah. Your SG&A was down handsomely over year over year I mean, obviously, we know Jerry has been working hard to to eliminate things where he can.
Speaker Change: So you know as we look at that and we look at it in the context of a prior year I mean do you think that for the current year you have the potential to be down you know kind of a similar percentage throughout the year or yeah, what kind of can you give us a sense of where that's trending for the year.
Speaker Change: Yeah.
Speaker Change: Obviously, we can we are always consistently looking at opportunities. We made good progress last year and we have I think some opportunities from an expense reduction and an efficiency perspective going forward particular around and not surprisingly I T automation efficiency things of that nature.
Speaker Change: So.
Speaker Change: Those will always be efforts that will allow us to continue to drive cost reduction, where we cant. However, I think there is going to be an emphasis on the business to also make sure we make the right investments going forward.
Speaker Change: Particularly in driving growth of the business. So I think that will be a constant.
Speaker Change: That balance that the business will look at I would probably say I would probably not anticipate similar.
Speaker Change: Year over year expense reductions that we've been able to achieve over the course of the last two years, but I think that's going to result in investments that will hopefully drive a better overall company performance.
Jerry Yang: Add to Jerry's comments, you know this is a transformational year. So there are things that we've seen that we need to make some investments for the future and you know.
Jerry Yang: Given the current business conditions for some time to do a little faster than others, but we would do this in a cautious but predictable way that that will still drive to our goals and.
Jerry Yang: And we're finding ways to fit that in the existing expense profile of the best we can.
Jerry Yang: It makes sense and if I could just get one more real quick before I jump back in the queue.
Jerry Yang: You talked a lot about.
Jerry Yang: You talked about a lot about diversifying end markets and there were some specific mention in the press release about the semiconductor sector Ah Yeah, very specifically I mean could you just built I just talk about you know how things are progressing there I mean, I know, it's not a light switch like overnight it doesn't happen overnight that you're you know.
Jerry Yang: Growing significantly in end markets that you haven't been in or have been nascent and for awhile, but it sounds like you know based on that what are you trying to read the tea leaves in the press release that you're making some progress there maybe you could just give us some color yeah wed love to what's actually I won't say, it's never easy right, we we intend to be.
Jerry Yang: Our embedded show in Nuremberg, Germany in March so well from Germany to Anaheim back to back trade shows.
Jerry Yang: The embedded show is not something that we've attended one years ago, but felt like going to make a better effort at these shows in the future, but it will probably show with a show next year. We made some really great contacts we brought over our chief engineer and really struck up a lot of great conversation, that's probably a good 'twenty to 'twenty two contact.
Jerry Yang: But we made there.
Jerry Yang: Came back we had one with a particular supplier we're under NDA with with these.
Jerry Yang: The conversation was fantastic it could not have gone better now does this result in business right away no, but to be able to get the relationship going forward.
Jerry Yang: It's just the level that we're at.
Jerry Yang: And if the position in which they are introducing their new products was far better than I, even imagined and so it's been surprisingly.
Jerry Yang: Quicker than I would've expected I would say these conversations are well ahead of even what I thought they would be again I can't say, what that's going to translate in business, but when you can create a relationship with the semi house and you're in with their new products and their their product groups within their industrial group their automotive group.
Jerry Yang: Electronics group, you can't be better positioned and so this is something dinner I used to do years ago, and it's one of the initiatives that I've you know architect it to the board back in October and I, David I would say that going far better than I thought they would this early and so what we will be reporting out more specifics.
Jerry Yang: As we can in Q2 and Q3, but they are going very well.
Speaker Change: That's great news didn't hear well again, congrats on the quarter guys I'll yield the floor.
Jerry Yang: Okay.
Jerry Yang: Thank you.
Jerry Yang: Our next question comes from Christopher Trotsky Private Investor. Please go ahead.
Jerry Yang: Good afternoon. Thanks for taking my question I wanted to ask about the subject you were just discussing.
Jerry Yang: There is technological what is and new technological develop likes it.
Jerry Yang: Importantly for our semiconductor calls too.
I actually have a pretty full.
Jerry Yang: Programmer a vendor.
Jerry Yang: Well, yes, and this is really becoming.
Jerry Yang: One of the reasons why we wanted to focus on these partnerships because the technology's nowadays such as U S. S. Nvme These memory technologies, which used to be the easiest technologies program quite honestly because he just be programming a simple data file it's a memory block now these.
Jerry Yang: Uff's parts. They are very specific protocols do you have to fall.
Jerry Yang: You have to be able to emulate those handshakes with in the programming algorithm.
Jerry Yang: These are fairly very complex.
Jerry Yang: So it takes different types of equipment, which we invested in the Q1 to get through a specific you know.
Jerry Yang: Technology roadmap that we had pending already which you know really got through and over our hurdle far faster than we would've been in the past. So yes. Those relationships are absolutely critical because we're testing. These say critical timing paths, we need feedback from the suppliers are we on the right path and so it is.
Jerry Yang: Something that data real got a little behind in and we're playing a little catch up but we plan on getting ahead by one using these relationships and to being more engaged with the governing bodies around these protocols. It's it's it's a much more complex world, which by the way favors stayed ohio's future market I mean, the market will grow.
Jerry Yang: Inorganic organically just based on the size of these memories that are coming out that will have to be taken offline to program we saw roadmaps.
Jerry Yang: As early as 'twenty 'twenty seven for one terabyte Flash I mean that is a ton of memory you can't do that in line.
Jerry Yang: As you know the file sizes aren't going to be one terabyte, but theyre going to be a big portion of that memory. So yeah. I think we are definitely positioning and this is where you'll hear in the coming quarters, our protocol roadmap, which is pretty exciting.
Jerry Yang: Hope that answers your question.
Ben: Right. So what you're saying is that Oh, let me just try to simplify things you were saying that at this point you don't you can no longer a program at these levels is the usual way the way the way your telephone boxes with them all the way up both device likes this is Ben.
Jerry Yang: I have two programs the programs.
Jerry Yang: You know different way because you just need to put to way more data than that to be done twice.
Jerry Yang: All.
Jerry Yang: Right right exactly in those protocols and what you have to follow to access the memory. So although your adult public.
Jerry Yang: Those public or are those something privacy, so with with the semiconductor we wouldn't share those publicly because it's our it's our intellectual property.
Jerry Yang: Right about the semiconductor.
Jerry Yang: Semiconductor company specified the protocols.
Jerry Yang: Yeah, I mean, they're out there sure how we apply them, it's our IP, but oh, yeah. Those those are all public I mean, you can go on the different governing bodies would be shared.
Jerry Yang: Happy to share those in the future of where do you go get that information, but that's public information for sure like if you went into Micron's web site looked up you know Uff's Ford auto and protocols to Lotto it'll tell you what's in it.
Speaker Change: Can you do it I.
Speaker Change: I mean people nowadays some of our competitors just take a goldman chip and duplicate it but then you have yield issues. So.
Speaker Change: Okay.
Speaker Change: I see alright.
Speaker Change: Alright, Oh, it's good to hear that Oh, so what you're saying is that there's no technological hurdles and luxury.
In your business, Okay, that's good to hear.
Speaker Change: So it will in the coming quarters, we will have we'll be announcing our product roadmap, which will have a lot more detail behind it.
Speaker Change: Okay, Okay, I'll be listening for that and I. Just wanted to ask also have you have you seen an improvement.
Speaker Change: Uh huh.
Speaker Change: In all of those.
Speaker Change: Or is it the people just you're waiting.
Speaker Change: Yeah, It's a Saturday I don't know if you want to take a stab at this one but the tariffs have had some noise in the headlines there's definitely created a swirl and things are you know if you even look through our Q1 as good as it was I mean January and life.
Speaker Change: I'd like to say it was definitely a big part of the team Jay was a great month normally isn't a great month in Q2 is typically a slower month any ways. Historically, if you look back at our financials, but you know January Hot February really good March it got quiet and naturally I mean, that's just what's going to happen. When you have the uncertainty that you see.
Speaker Change: So Chris maybe to jump on that again, maybe I'll use the our system is versus our reoccurring rubbing number one again, our reoccurring revenue is pretty steady it that's pretty steady week to week and that would have been at this point just a couple of weeks into the month of April.
Speaker Change: We're happy with our reoccurring revenue, that's why we like it and we have it.
Speaker Change: Relative to our systems on Capex sales as are indicating in our earnings release and indicated earlier, we did have a little bit of delay and push out as we finished the quarter.
Speaker Change: Our sales team is actively working with our customers because.
Speaker Change: Because they have to go through the process of understanding its impact on their business and so we're staying close to them and no at that at some point whatever our customers do we're going to follow because that's the nature of how we support and so I anticipate that we will continue to probably be a little slow working with mark.
Speaker Change: Customers, but the expectation would be that we're still a couple of weeks.
Speaker Change: Oh about Q2, but we're working hard to make sure we mitigate the issue.
Speaker Change: And Codelco SKU do you do your truck I'm.
Speaker Change: I'm truly truck utilization of your systems are there.
Speaker Change: They are they running called towards utilization also slowing because we started from.
Speaker Change: But could you repeat that one more time I'm not sure I caught all of it.
Speaker Change: So I'm sure you're truck utilization of your systems out in the field.
Speaker Change: Let me Coke.
Speaker Change: You know, we don't track the utilization of our customers.
Speaker Change: You know quite honestly, they're not gonna, let us tether into their network and Trek answers I'd love to it'd be great. If I could do that for us because.
Speaker Change: Data off the machines, we can do a lot more predictive maintenance and things like that but you know given the global security concerns that's just not going to happen. Unfortunately, I would love it if we.
Speaker Change: Live in a different world nowadays, but kind of building on what part of what Dave indicate asked and it would and our response earlier.
Speaker Change: Do you have some early indicators, obviously are good examples of bookings right bookings lead to revenue. Another indicator is our R. A socket or adapt ourselves.
Speaker Change: To the extent that we see a continued and in increase adapter.
Speaker Change: Request it means our customers are using our products and at some point that either means that they're going to hit capacity and wants to buy more of our products. So that again is a key indicators that we follow and it's also why we do track D. S. Ours, specifically sockets to Jerry's point is that you know that's an indicator of usage and utilization of the.
Speaker Change: I can see this quarter may be customers, maybe against all your capex, but buying more programming has per se options things that can expand volume without having to do a heavy heavy capex now and get by you know based on their uncertainty. So we're monitoring.
Speaker Change: That's super closely and to see what that behavior is and again talking to our customers weekly.
Speaker Change: We have a very you know we've increased our cadence with our clients and we're just monitoring the situation as closest weekend.
Yeah.
Speaker Change: Thank you. That's a reminder to ask a question you May Press Star then one on your telephone keypad.
Speaker Change: Seeing no further questions at this time I would like to turn the call back over to management for closing remarks.
Jerry Yang: This is Jerry Thank you again, thank you very much operator.
Speaker Change: To all listeners and participants in todays event. We appreciate your continued interest in and support of data I O. As you can tell we are very excited and enthusiastic about the opportunities ahead of us given the uncertainties regarding uncertainties regarded regarding tariff regimes unfold at this point I'd like to conclude.
Speaker Change: Call enjoy the rest of the day. Thank you again, joining us and goodbye.
Speaker Change: One.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Speaker Change: [laughter].
Speaker Change: [music].