Q1 2025 Socket Mobile Inc Earnings Call

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Paul: Welcome to Socket Mobile, Inc.'s Q1 2025 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 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 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.

Paul: Welcome to the socket Mobile Inc. Q1, 2025 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.

Paul: Seven a of the Securities Act of $19 33, as amended and section 21 E of the Securities and Exchange Act of $19 34 as amended.

Paul: 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.

Paul: The markets in which socket mobile sells its products.

Paul: 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. 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.

Paul: 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.

Paul: Rolled out as predicted due to technological market or financial factors, including the availability of product components and necessary working capital.

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

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

Paul: 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.

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

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

Paul: Socket does not undertake any obligation to update any such forward-looking statement.

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

Paul: 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: 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, you may begin. Thank you, operator. Good afternoon, everyone. Thank you for joining us.

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

Kevin Mills: Thank you operator.

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

Kevin Mills: Our revenue for Q1 was $4 million, a decrease of 20% over Q1 2020. We recorded margins of 50.4%, a slight decrease from the 51% margins in Q1 2024. Our operating loss was $900,000 compared to an operating loss of $500,000 in Q1 2024.

Kevin Mills: Our revenue for Q1 was $4 million.

Kevin Mills: A decrease of 20% over Q1 2024.

We recorded margins of 54% slight decrease from the 51% margins in Q1 2024.

Kevin Mills: Our operating loss was $900000 compared to an operating loss of $500000 in Q1 2024.

Kevin Mills: Overall, Q1 was a difficult start to the year. Revenue came in lower than expected as we saw weakness in both our domestic and international business. While it's impossible to know for sure, we feel the level of uncertainty froze a lot of deployments and routine business during Q1, resulting in lower revenue.

Kevin Mills: Overall Q1 was a difficult start to the year.

Kevin Mills: Revenue came in lower than expected as we saw weakness in both our domestic and international businesses.

Kevin Mills: While it is impossible to know for sure we feel the level of uncertainty throws a lot of deployments in routine business during Q1, resulting in lower revenues.

Kevin Mills: The positive news from the quarter was that we saw the first green shoots in the industrial portion of our business, which Dave will detail in a few moments.

Kevin Mills: The positive news from the quarter was that we saw the first green shoots in the industrial portion of our business, which Dave will detail in a few moments.

Kevin Mills: As regards the outlook The tariff situation has greatly complicated everyone's life. Socket, like everyone else, has a very international supply chain. In broad terms, we source about 30% of our materials from Mexico, 20% from Taiwan, and about 10% from China, with the remaining 40% sourced in the U.S. So the tariffs do impact. We are working with our customers to minimize the impact as much as possible, especially with our international. From our customers' point of view, we are a component of their solution and therefore the strength of their business is dependent on other elements in their supply chain.

Kevin Mills: As regards the outlook.

Kevin Mills: The tariff situation has greatly complicates everyone's lives.

Kevin Mills: Like everyone else has a very international supply chain in broad terms, we source about 30% of our materials for Mexico, 20% from Taiwan, and about 10% from China with the remaining 40% sourced in the U S.

Kevin Mills: So the tariffs do impact us we.

Kevin Mills: We are working with our customers to minimize the impact as much as possible, especially with our international customers.

Kevin Mills: From a customer's point of view, we are a component of their solution and therefore, the strength of their business is dependent on other elements in their supply chain.

Kevin Mills: And this is particularly true for our many retail customers.

Kevin Mills: And this is particularly true for our many retail customers.

Kevin Mills: So we expect retail to remain at current levels until there is more certainty and people can make and execute plans. Thankfully, we expect most of the near term industrial business to be in the US and less likely to be impacted by the So overall, we believe we will be able to continue to invest in our business and achieve positive EBITDA results for Q2 and believe we will be able to achieve profitable operating levels for the second half of the year.

Kevin Mills: So we expect retail to remain at current levels until there is more certainty and people can make and execute plans.

Kevin Mills: Thankfully.

Kevin Mills: We expect most of the near term industrial business to be in the U S.

Kevin Mills: And less likely to be impacted by the tariffs.

Kevin Mills: So overall, we believe we will be able to continue to invest in our business and achieved positive EBITDA results for Q2 and.

Kevin Mills: And believe we will be able to achieve profitable operating levels for the second half of the year.

Dave Holmes: And now I'd like to turn the call over to Dave, who will provide more details on our progress in the industrial segment. Dave. Thank you, Kevin. Good afternoon, everyone. As Kevin said, today I'd like to highlight a few of the significant milestones that we achieved in Q1. We've invested a lot of into our expansion into industrial scanning and handheld computing markets over the last two years. Those investments are starting to bear fruit in 2025. We're seeing a lot of interest from a variety of customers in warehousing and logistics, manufacturing, mining, oil and gas, energy, and construction.

Kevin Mills: And now I'd like to turn the call over to Dave who will provide more details on our progress in the industrial segment Dave.

Dave: Thank you, Kevin and good afternoon, everyone.

Dave: As Kevin said today I'd like to highlight a few of the significant milestones that we achieved in Q1.

Dave: We've invested a lot of into our expansion into the industrial scanning and handheld computing markets over the last two years.

Dave: Those investments are starting to bear fruit in 2025.

Dave: We're seeing a lot of interest from a variety of customers and warehousing.

Dave: Logistics.

Dave: Manufacturing mining oil and gas energy and construction.

Dave Holmes: Widespread testing is underway, and we've received purchase orders for a long-term rollout from a Fortune 50 Tier 1 industrial customer. The ruggedized scanning market is large, and our entry into this space will help us diversify our business beyond retail.

Dave: Widespread testing is underway and.

Dave: And we have received purchase orders for a long term rollout from a fortune 50 tier one industrial customer.

Dave: The Ruggedized scanning market is large and our entry into this space will help us diversify our business beyond retail.

Dave Holmes: We also recently announced the launch of the Xtreme iXG and iXS series powered by iOS and featuring a fully integrated iPhone 16e. These devices are designed to serve as full-featured handheld computers, combining high-performance, long-range barcode scanning with the connectivity, app ecosystem, and user-friendly interface of the iOS platform. Together, these capabilities allow frontline workers to capture data more accurately, respond more decisively, and perform critical tasks with greater speed and confidence. These products put Socket Mobile into the $27 billion mobile handheld computing market. Our Xtreme Scan product is comprised of three different configurations, Xtreme Scan Case, Xtreme Scan, and Xtreme Scan Grip, all designed for iPhone.

Dave: We also recently announced the launch of the extreme IX G and I excess series powered by iOS and featuring a fully integrated iPhone <unk>.

Dave: These devices are designed to serve as full featured handheld computers, combining high performance long range barcode scanning with.

Dave: With the connectivity ecosystem and user friendly interface of the iOS platform.

Dave: Together these capabilities allow frontline workers to capture data more accurately respond more decisively and perform critical tasks with greater speed and confidence.

Dave: These products that socket mobile into the 27 billion dollar mobile handheld computing market.

Dave: Our extreme scan product is comprised of three different configurations extreme scan case extreme scan an extreme scam grid all designed for iPhone.

Dave Holmes: And now we're offering models with iPhone 16E inside. Extreme Scan is designed to enable iPhones to withstand harsh industrial conditions, offering robust scanning capabilities and military-grade durability. This opens the door to new customer segments that demand the ultimate performance in the most difficult environment.

Dave: And now we're offering models with iPhone <unk> inside.

Dave: Extreme scan is designed to enable iphones to withstand harsh industrial conditions offering real best scanning capabilities and military grade durability.

Dave: This opens the door to new customer segments that demand the ultimate performance and the most difficult environments.

Dave Holmes: Beyond new products, we're also seeing our investments in our customer and developer experience having an impact with our partner. Alfred, our AI-powered developer support assistant, is helping our developers around the world with multilingual support to integrate our Capture SDK into their apps so they can enable best-in-class scanning capabilities into their mobile platform. Our new product and technology investments will extend our reach and diversify our customer base. Ultimately, this will make us more sustainable and less dependent on retail as we become a more complete data capture company.

Dave: Beyond new products, we're also seeing our investments in our customer and developer experience, having an impact with our partners Alpha.

Dave: Alfred our AI powered developer support assistant is helping our developers around the world with multilingual support.

Great our capture SDK into their apps. So they can enable best in class scanning capabilities into their mobile platforms.

Dave: Our new product and technology investments will extend our reach and diversify our customer base ultra.

Dave: Ultimately this will make us more sustainable and less dependent on retail.

Dave: As we become a more complete data capture company.

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

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

Lynn Zhao: Lynn. Thanks, Dave. Revenue.

Lynn: Thanks, Dave.

Speaker Change: Revenue good afternoon, everyone. Thank you for joining today's call.

Lynn Zhao: Good afternoon, everyone. Thank you for joining today's call. Revenue in Q1 decreased 20% year-over-year to $4 million from $5 million in the prior year quarter, and it decreased 18% sequentially from $4.8 million in Q4 2024. Gross margin for Q1 was 50.4% compared to 50.3% in Q1 2024 and 51% in Q4 2024. Operating expenses for Q1 were $2.9 million compared to $3 million year-over-year and $2.9 million in the preceding quarter. We recorded a Q1 operating loss of $0.9 million compared to $2.5 million loss in Q1 2024 and a 0.4 million loss in the preceding quarter. Q1 adjusted EBITDA loss was $485,000 compared to a positive EBITDA of $40,000 in Q1 2024 and $140,000 in Q4 2024.

Speaker Change: In Q1 decreased 20% year over year to $4 million from $5 million in the prior year quarter, and a decreased 18% sequentially from $8 million in Q4 can be heard before.

Speaker Change: Margin for Q1, with 54% compared to 253% in Q1 2024.

Speaker Change: And the 51% in Q4 of 24.

Speaker Change: Operating expenses for Q1, or $2 $9 million compared to $3 million year over year.

Speaker Change: The $2 $9 million in the preceding quarter.

Speaker Change: We recorded a tier one operating loss.

Speaker Change: $9 million compared of to your point.

Speaker Change: <unk> loss in Q1, 2024, and the point for me loss and in the preceding quarter.

Speaker Change: Q1, adjusted EBITDA loss was $485000 compared to a positive EBITDA of $40000 in Q1 24.

Speaker Change: $140000 in Q4 24.

Lynn Zhao: diluted the loss per share in Q1 was $0.13 compared to $0.07 in Q1 2024.

Speaker Change: Diluted loss per share in Q1 with.

Speaker Change: 13th.

Speaker Change: Compared to two seven in Q1 coming from before.

Lynn Zhao: Turning to our balance sheet, we ended Q1 with a cash balance of $1.7 million. Cash outflows included $700,000 for operations and $50,000 in capital expenditure. As of March 31st, our inventory level net of reserves stood at $5.3 million compared to $5 million at the end of 2024. On April 21st, we renewed our $3 million domestic bank credit line, which will now mature in April 2026. This line allows us to draw up to 80% of our domestic accounts receivable, if needed. Currently, there are no outstanding draws.

Speaker Change: Turning to our balance sheet, we ended Q1 with a cash balance of $1 $7 million.

Speaker Change: Cash outflows included a $700000 support operations and $57 in capital expenditure.

As of March 31st our inventory level net of reserves.

Speaker Change: At $5 $3 million compared to $5 million at the end of 'twenty 'twenty four.

Speaker Change: On April 21st we renewed our $3 million domestic banks are the line, which will now mature in April 2026.

Speaker Change: This new line allows us to draw up to 80% of our domestic accounts receivable if needed currently there are no outstanding draws.

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 operating airport question.

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

Speaker Change: Operator.

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

Speaker Change: You'll be placed into the queue in the order received please be prepared to ask your question. When prompted once again, if you would like to ask a question. Please press star one on your phone now.

Speaker Change: And once again Thats star one for any questions.

Paul: And it appears we have no questions at this time.

Speaker Change: And it appears we have no questions at this time I will turn the call back over to your host for any closing remarks.

Paul: I will turn the call back over to your host for any closing.

Paul: Thank you, operator. So thank you for participating in today's call, and I wish you all a good afternoon. Thank you. Goodbye.

Speaker Change: Thank you operator, so thank you for participating in today's call and I wish you all a good afternoon, Thank you and goodbye.

Speaker Change: Yeah.

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

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

Paul: The host has ended this call. Goodbye.

Speaker Change: The host has ended this call goodbye.