Q2 2025 Data I/O Corp Earnings Call
Good afternoon everyone and welcome to the data IO, second quarter, 2025 Financial results conference call.
All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions.
Please note today's event is being recorded.
Speaker Change: At this time I'd like to turn the conference call over to Mr. Jordan Barrow investor relations, please go ahead sir.
Speaker Change: Thank you, operator. And welcome to the data IO Corporation, second quarter, 2025 Financial results conference call with me today, are the company's president and CEO Bill Wentworth and interim, Chief Financial Officer. Todd Henny.
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 positions.
Speaker Change: Markets economic conditions, supply chain, expectations, estimated impact of tax and other regulatory reform product, releases, new industry, participants and any other statements that may be construed as a prediction of future performance or events or forward-looking statements, which involve knowing and unknown risks, uncertainties and other factors which may cause actual results to a different material from those Express.
Speaker Change: Implied by such statements.
Speaker Change: These factors also include uncertainties as the impact of global and geopolitical events International tariff, and trade regulations order levels for the company and the activity level of the automotive and semiconductor industry overall ability to record revenues based on the timing of product deliveries and installations Market acceptance of new products changes in economic conditions and market demand part, shortages, pricing, and other activities by competitors and other risks including those described from time to time in the company companies following up on forms 10K, and 10 Q with a Securities and Exchange Commission. You know, press releases and other Communications. The company may also reference gaap and non-gaap financial performance measures including 1-time items which are intended to provide listeners. With a means to better understand the company's performance, the accuracy, and completeness of all discussions on this call, including what we're looking statements. Should not be unduly relied upon
Data IO is 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.io.
Bill Wentworth: Thank you, Jordan, for that introduction. Um, I also want to, um, thank the people that have made the call and took up the time to listen to what we're going to talk about today. Um, as you can see, if anybody's seen the report, you know, bookings were up sequentially from Q4 412246 and q258 respectively. Um, that's obviously been a focus for us as to get that booking number going in the right direction.
Bill Wentworth: Um, it still hasn't settled in the backlog number. I see that in the second half and I'll talk a little bit more about that and why, um, the large system order, reflects our commitment to our core programming platform, the new Universal platform will be rolling out.
Bill Wentworth: Between now and the end of the year. And the reason for this investment is that the complexity of programming technology specially in memory has gotten a lot more difficult. And so, the commitment to that is we need to have a platform that can actually, you know,
Bill Wentworth: Handle these new technologies and the complexity that come with them and the changing standards that really almost change almost annually at this point. At least every 2 years.
Bill Wentworth: So um this complexity is driven the need to obviously invest in our core platform which we are doing in that order reflected that commitment because 1 of those Technologies was ufs flash memory and both ufs and nvme which are 2 Technologies. We are focused on not the only ones but certainly uh 2 of the core because they have the most complexity
Bill Wentworth: Um, have annual K guys between now and, uh, 2030 or 14% that is twice, the semiconductor market. So obviously there's a very good reason to be focusing in on these Technologies but also Advanced our platform in general, for the wide range of products that we have to serve and eventually end up on 1.4, which is our ultimate goal. Sometime the end of
Bill Wentworth: You know, 2026 beginning of 2027, which will also help reduce a significant amount of technical debt that company's been carrying from the past.
A well aware of it. Uh, we have 6, major events, between September and November. This is all around our new product Road, uh, road map, but the products are actually going to be introduced at these shows. These are 6 of the largest shows in their territory from China to Germany, which is productronica India. Now, has productronica because their Tech Market has grown significantly. So actually, this is the first time we'll be showing at that event with our new products.
Bill Wentworth: Uh, China has their show in October and this is a spattering of other vets as well. So, um, in Mexico, guadalara they have their largest event in September as well. So this should really pick up with significantly increase the lead generation that we'll be doing. So these are Big announcements that really drive a lot of value and understanding about where data, I was going with this technology and its road map overall. And these are road maps that were not just done on a vacuum. I mean, they were done with sharing data with our semiconductor Partners, which we established better, you know, more significant Partnerships in the first uh, quarter of this year. Which really helps us really look out 10 to 15 years but where we need to be
Bill Wentworth: Uh because the technology is not going to slow down. So we we have to be able to accept and be able to have room in our fabric of our platform, to be able to absorb these new technologies, which we will have uh, everything from a milestone perspective is on track. Uh, which is great. It's a little tight, but always happens. But we look really good for these launches for the second half.
Bill Wentworth: Um, what else would I like to say? Now? It's the product road map. Let's see. I think that's it for right now. Um, I will now turn over to Todd Henny for our financial section but really look forward to the Q&A. Um but we have plenty to talk about and I'm excited to talk about it. Uh so look forward to your questions. All right, go ahead. Thank you, Bill and good day to everyone. It's a pleasure to speak with all of you today in my remarks, I will address our recent financial performance in more detail. My comments today will focus on key points of interest for the second quarter of 2025, recent Trends, and our outlook for the second half of the year.
Todd Henny: Net sales in the second quarter of 2025 or 5.00 million down from 6.225% 2024. First quarter of 2025 revenues were elevated due to the completion of a large order received in the first quarter of 2024. We were also awarded a large order toward the end of the second quarter 2025 which is expected to be shipped and recognized as Revenue in the second half of the year.
Todd Henny: Automotive electronics as a primary business segment represented 66% of second quarter 2025 bookings, compared to 59% for all of 2024 Asia. Led by China has been relatively strong particularly within the EV sector of automotive, electronics, Europe and the Americas. Continue to be pressured by pent-up Capital Equipment, spending due to tariff and trade uncertainties, despite this headwind consumable adapters, and services provide a stable base of reoccurring Revenue which represents 50% of total revenue in the second quarter.
Todd Henny: Moving on to new bookings, the first 2 months of the second quarter. Carried forward. Similar activity from the first quarter order activity, which were impacted by the aforementioned tariff, uncertainties conditions approved in June as evidenced by the large order, we announced and have continued to remain active in the third quarter to date. Even though certain of the international trade, negotiations, remain an issue.
Todd Henny: second quarter of 2025 bookings, were 5.8 million up from 4.6 million in the first quarter of 2025 and 5.6 million in the second quarter of 2024 backlog, as of June 30th, 2025 was 2.8 million down 200,000 from March, 31st 2025
Todd Henny: Gross margin is percentage of sales was 49.8% in the second quarter 2025 as compared to 51.6% in the first quarter 2025 and 54.5% in the prior year period, a lower margin product. Mix and configuration of automated systems driven by a large customer order led to reduced margins.
Todd Henny: Direct material costs, remain steady, and consistent with prior periods, ongoing supply chain planning, and other actions have been mitigating the impact of new, tariffs trade and inflationary pressures, including shifting, material sourcing and product Manufacturing.
Todd Henny: More recently, we are seeing some smaller items creeping in like, for example, aluminum that have been hit with higher tariffs in certain parts of the world. We are not an aluminum buyer directly, but there's a small percentage of that metal in some of our system parts. We purchase we are taking steps to avoid this increase in price and note that it is currently in very small and limited amount within our overall cost of goods sold.
Todd Henny: Operating expenses for the second quarter 2025, or 3.8 million up from 3.6 million in the first quarter of 2025 and 3.3 million in the prior year period.
Second quarter, 20.
Todd Henny: 2025 spending included approximately 480,000 dollars in 1 time expenses, which are part of the company's investments in the core programming platform. And then Information Systems, as well as for leadership and other Human Resources, transition requirements,
Todd Henny: While savings from prior improvements in operations and more recent Investments are expected to continue to positively influence financial performance. The 1 time spending items are being brought to light to provide transparency and to what we are doing and where we believe we'd be under normal conditions.
Todd Henny: For comparison purposes, first quarter operating expenses, including annual spending on public company costs pertaining to audits regulatory fees and NASDAQ fees of approximately dollars.
Todd Henny: The additional 1 time spending in the second quarter of 2025. Put us into a loss on operating income. Net, income and adjusted EBA basis.
Todd Henny: Said in looking into cash flow and the balance sheet, we used a very small amount of cash in the quarter primarily from Investments as we've touched upon during the call. And for the other 1 time spending purposes, I'd like to provide additional color and perspective on these 1-time items.
Todd Henny: We're making Investments as well as critical enhancements to our technology platform and putting in place a roadmap for the Future. These Investments are 1 time in nature, which amounted to approximately 165,000 dollars in the second quarter of 2025. We also made the important decision to invest in the establishment of 2. Other key functional areas, 1 our new sales and marketing, strategies and 2, the framework for ongoing go growth and future business line expansion.
Todd Henny: Additional 1-time expenses, included costs related to HR and the CFO transition for which we spent about 145,000 dollars in the second quarter of 2025.
Speaker Change: We expect to make an announcement of a permanent CFO in the third quarter of 2025, but I remain on board for a brief period of time to ensure a smooth transition.
Speaker Change: Therefore, we expect some double spending in the third quarter of 2025, and possibly the fourth quarter of 2025 on the CFO transition.
Speaker Change: 1-time expenses in the second.
Speaker Change: Second quarter of 2025 for technology and it related G growth initiatives, amounted to 170,000.
Speaker Change: Total 1 Time Investments and expenses. In second quarter, 2025 were approximately 480,000 dollars which reduced our profits adjusted to eat the da and Cash In the period.
Speaker Change: Backing out, 1. Time expenses in the second quarter of 2025 would have left us with an operating loss of 364,000. Versus the reported second quarter operating loss of 844,000 and the second quarter of 2024 operating loss of 566,000 again, backing out 1 time, expenses, adjusted, the beta would have been 43,000 versus the reported adjusted EV but the loss of 437,000 and positive adjusted evadav $3,000 in the prior year, period.
Speaker Change: Working within this framework, it would seem that our cash balance absent. The 1 time. Expenses would have been approximately 480,000 higher or nearly 10.5 million as of June 30th 2025 versus the reported amount of dollars.
Speaker Change: At the end of June 2025, and, uh, 10.3 million as of December 3124.
Speaker Change: Based on this analysis, we can see that our financial performance and cash management reflect and improve cost structure and effective handling of our inventory and other short-term assets. All while we invested for more productive operations and future growth. And scaling of the business,
Speaker Change: Data io's networking capital of over 15.6 million dollars, as of June 30th 2025 with slightly lower than 16.1 million. At the end of last year, large reflecting 1-time spending to the first half of the year, which also included public company, and other annual costs paid in the first quarter of 2025,
Speaker Change: Currently the company continues to have no debt.
This concludes my remarks for the second quarter of 2025. Operator, would you please start the Q&A portion of the call?
1 using a touchtone telephone to withdraw your questions. You may press star and 2. If you are using a speaker-phone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality.
Once again, that is star mn1 to join the question queue.
Speaker Change: Our first question today comes from David Marsh, from singular research. Please go ahead with your question.
David Marsh: Hey, thanks guys for taking the questions. Um,
David Marsh: just wanted to start out if I could uh, quick housekeeping, uh, question um, with regards to the 480,000 Todd. Um, can you tell me, you know how that hits the p&l? You know in terms of sg&a R&D or how it might hit the p&l um and how we could think about that going forward in particular around? Um you know around the kind of double counting you were saying for CFO services in the back half of the year
David Marsh: yeah, it really, uh,
David Marsh: David it hits multiple areas. I mean, the primarily the area it's going to hit is going to be the the GNA category because that's where the it spending goes. That's where the finance spending goes. That's where HR goes. So a majority of that is going to be on the GNA line and some of the Consulting is in there as well and some of its in and also the executive there's some Consulting in the our executive group and that's also in the same line item and that I would expect to kind of run out by the end of the year. So with the savings that we're seeing across, we did a lot of it Discovery in our
David Marsh: Infrastructure. And it was uh there was a lot of Discovery to be done there. Um and so we identified all the spend uh 1 of my the Consultants I brought in is going through each vendor.
David Marsh: We've already seen what we think we've already identified about 512,000 worth of uh, suspend reduction in our it annually. And so we're probably about halfway to that number. I um already implemented expect the rest of that to be done by definitely before year end for sure. I can't tell you exactly when because some of it's got a lot of complexity to it and, you know, we're trying to move as much as we can to the cloud get more stuff off Prem which then enhances our security. So there's a lot of, you know, we'll end up with far better infrastructure, our secure infrastructure and half the price. So I think it's a, it's been a great exercise for sure. Um, and then I would expect the Consultants that, you know, do run up to about, you know, annualized, if I use the number some of my increase because of the work that they're doing specifically in it, so that's going to more than pay for itself. Um, you know, probably about an annualized, spend around a half a million dollars, maybe a little bit more. There's a couple people that we've extended that were supposed to.
David Marsh: To retire. I convinced to stay on board because of their 30 years of knowledge and they've been super helpful in defining, our new programming platform and and looking at being more vertically integrated, which is 1 of our group, New Growth strategies that we've now identified in Q2 and we'll be moving forward. Uh, uh, in the second half.
David Marsh: And that's also expanding into Services which I talked to some of the shareholders about so sorry for that long way to answer but I just want to get all that out Dave.
No. No, that's really helpful. I appreciate that. Uh, appreciate that color and detail. Um, hey so
Speaker Change: Bill I I guess, you know, I kind of want to dial in here a little bit on on, uh, you know, the USF, ufs flash, you know, have a lot of commentary, obviously, in the press release about it and um, yep, you know, obviously, you know, great, great news on the, you know, on, you know, on these new orders. Um, but you know, this is, this is a, this is a part of the business that's been kind of challenged um, you know, with kind of lower yield rates. Historically, could you just talk about, you know what, you know what date I can do differently. That might, you know, produce some better yield rates and um, you know, just talk about a little bit more about the, about the
Thanks for the layup. I appreciate that.
Speaker Change: If that's the typical yield from memory devices, it has been ever since flash came out.
Speaker Change: You ufs, you get a picture, it almost like a hard drive, it's got multiple layers, just like a hard drive platters. And there's also a small part of what's inside the memory that directs to each 1 of those slivers of wafer or memory section to
Speaker Change: Basically land the data and so it's like a mini hard drive in a way but it just doesn't through flash cells and a and a small instruction code, that's why they have these what they call. Protocols, these handshake, protocols have only been present in ufs. They're not even in emmc, EMCC, is just a large piece of memory, that's it. Ufs is a completely different animal and so much more difficult. And if you don't pre-plan in your architecture for this technology, there's no way you get there. We get to invest in some bench equipment, to help us actually drive the ability to, for the engineers to actually identify why they why it was not work, why we were not getting those yields. I mean I when I went to Asian December, it was
Speaker Change: It was chaos there and, and it was because driven by ufs the yield, the log files, the yields were all over the place, it would bounce to each site would bounce around from failure rates, and nobody knew why. And so, when I came back from that trip is and then I dove into the platform to find out why it was evident as to why that happened. And so, you know, we've been working since January when Sean Duffy who took over our hardware department, in January. I said, John welcome to uh welcome to data Rio and you need to design a new platform.
Speaker Change: Pretty big introduction. He's done a phenomenal job of getting the engineers rallied around this and I will tell you testing on a certain contact that we're trying and it's an older contact technology socket technology but we've honed in some of the parameters of it. You know, we're seeing a 100% yield right now, it tests now it's a small sample size so you know, we're not ready to say we've won the war because we haven't, it's still a ways to go. There's still some intimate and issues that are happening, but we have line of sight. And so, we also are trying other socketing technology that, I believe will actually offer better, uh, contact and capability. Because the next most important thing to our platform is the ability to contact the device. If you can't make that 100% perfect, it's very difficult to drive good yields. It just is. So it's 1 of the reasons why we're looking.
Speaker Change: It being more vertically, integrated around socketing and and getting into that market and it's not a bad Market. It's 7 billion dollars, so it wouldn't be bad for data to enter that market to get a little sliver and it's a larger market. So it can increase our overall, you know, Revenue over time. And the margins are pretty solid. So anyway, sorry for that long-winded answer. But but that is our primary focus is yield.
Speaker Change: Got it. And then if I could just 1, you know, sne 1 last 1 in here before I yield um just, you know, gross margin. This is kind of a, a low water mark, for the last couple of years that we've seen for the company, can you just kind of, you know, obviously, you're trying to cut your comments on, on mix, but maybe you could, just give a little bit more color on that, and kind of just what the expectations are, you know, maybe for the back half of the year if you have any of that available. Yeah, I do actually another layup. Thank you. Um, so so that order came in June and we're actually able to ship a few systems out before the end of the quarter, probably 6 of them, um, that came from 1 of our larger customers.
Speaker Change: And you know the the um iOS or the options I would say they don't put a lot of them in. They do load up on the program is that's was 1 of the reasons why we had to conquer this 4.0 because
Speaker Change: This is part of that order because they were they were putting luminex heads in the system. It's not as much as we would like but you know enough. But if they were the smaller systems, less iOS and you've got, you know,
Speaker Change: Front of the manual system launches and I will tell you from the early demos and conversations. We've had with customers, they're literally waiting for that product to come out to buy. Like, I think we've already got like 15 manual systems, not a ton of money but you know, that will start to really build out and we have a lot of low-hanging fruit with our system customers over the 500 systems that have been delivered over the last 10 years. Every 1 of those customers could at least buy 2 of these manual systems. So we really expect that to drive a lot more conversation with customers but also get us more exposure into what they're thinking, or where their businesses are going also for 2026. So that's the reason for the the the Press Mars and we also had some additional costs and costs of materials with prototyping for V1 reskinning V 0. So that had a little impact on the margin as well because those costs were not connected to any specific Revenue, just added cost to the supply side. So I hope that answers your question.
Speaker Change: Yep, very helpful. Hey thanks guys. I want to yield the floor.
Our next question comes from Casey Ryan from West Park Capital. Please go ahead with your question.
Casey Ryan: Uh, good afternoon everybody, thanks for the update. Um, hey real quickly, uh,
Speaker Change: I think we've talked in the past about wanting to expand Beyond automotive and I know that this takes time. Oh, yeah.
Speaker Change: Would you, would you be happy to give us, sort of a qualitative view of of how it's going, sort of, you know, expanding and getting into new customers right in talking to people who maybe maybe knew you but hadn't chose me in the past, um, because that's what it feels like a big expansion area. Right. Long term. Right. Right. Right now, it's a good question and you know, unfortunately unfortunately right now I would say, you know, the new conversations are really going to be driven by the lead generation from the 6 shows. We have coming up in the second half. Um right now you know I I wouldn't say that we're not out there selling but certainly we have these new product launches coming up and that we know is going to drive more value to customers and new customers. So, you know, we're kind of in that in between moment. Um, but certainly on the customer side. Um, you know, yes, Automotive continues to be a big because it's been very large. And when you have, you know, these, um,
Speaker Change: these uh, Trail headwinds, you know, as an example Korea, uh, our career reps, South Korea rep. It was, you know, 1 of our largest revenue producing reps and at this point last year they had Acquired. And, and when they forecasted the 2025, certainly Terrace wasn't in the discussion at that time. Um,
But, you know, they they were earmarked for 3.5 million of of Revenue. They've done zero.
Speaker Change: And it's a lot, has been tariff driven because in Korea, the customers we have there are tariff, affected their volume slow down, and they just put capex on hold. And so that's been a direct impact to our revenue for the first half. We would have a far better first app if that had not occurred.
Speaker Change: March. April and May were scary months, that's the best I could say, June was outstanding. You know, so we unlocked some of that, you know, kind of capex, uh, spend that was out there but again, it ended up being mostly Automotive. So it went from, we went from 59% or 58 to 66, so it's not the direction I want to go in, we definitely want to be more um, you know, diverse in our in our domains that we serve because that obviously makes the revenue more stable and not as impactful if you have an industry event. Like we have at an automotive which really started to affect the numbers early last year. So absolutely. And as a continued Focus Monty and the sales team are all over that. Um, we are changing, you know almost monthly kind of our strategy. It's getting better and better as we finetune it. We're we're definitely being far more consultative. Um, we came up with a additional sales strategies that are going to help that, but on top of it,
Speaker Change: Which should be about 12 weeks. I want to get at least the last 2 months fully under Salesforce service Cloud. But we're going to start those milk runs this quarter, probably September.
Speaker Change: Um, you know, it's after the summer season, everybody's back into full.
Speaker Change: Form. So after Labor Day, we'll probably start those. So we're identifying exactly the regions, we've got the team to go out, we're arming them with iPads so they can document all the data and enter it directly in a sales force. And then with service sales force service Cloud comes on online. That data will already be in there. There's a, there's not a whole lot of data will be able to pull from the old system because the way it was configured but we'll we'll be pulling over the meaningful data. Um, so yeah, if there's um, there's a total focus around enhancing our existing customer relationships and a lot of this comes from contract manufacturers. I mean contract manufacturers have as a service provider um, have diversity built into their customer base already. We had a couple machines go out to jville end of last quarter, 1 going out this quarter. Um so when they use these machines and some of the plants that are somewhat Universal in the markets, they serve some will be dedicated to Automotive. That's was where 1 of these systems went um, because of the reason
Speaker Change: That 1. It's a platform they designed into their build plan. So once you set that in automotive, you can't make changes so you're in but um, 1 is more of a 1 of the facilities. It does, um, you know, a broad range of products. So we are even
Speaker Change: Managing that to that level within the EMS world because you have to set up, uh, by domain based on compliance programs regulation, things like that. So no, it's very much a focus. I do not like being focused, I mean, look, I learned a very hard lesson back in 2001 of being too focused on a domain, which was networking and Telco back in early 2001 and it was devastating to the entire industry. Um so it's 1 of the things even as a board member identified. This is something that has to be changed.
Really right. Um, okay good. Well that's actually a very helpful.
Speaker Change: Overview. Um, so we just can't get out of Automotive way. They like us you're you're just too popular understand? Yes, I guess so.
Speaker Change: um,
so the bookings growth was really good. Right quarter over quarter. I think 206%, I mean, which is a big number on small numbers. So I understand that but um,
Speaker Change: You know, do you feel like we could continue to see bookings at this level? Or is it reasonable to think that bookings could actually keep Rising as it moves through the year, they should, and they will, um, I mean, we're rolling out new products, those the good thing about the booking numbers. And, and so systems are a little more challenging like depending on the system type.
Speaker Change: You know, the fact that we they were 5,000 actually was a good thing because we could build them faster. They're easier. Machines to make China is, I mean, the order was in China, the Shanghai facility built them and delivered them. So that was a unique situation, super, that's why we would focus so hard and getting over this ufs. Not only just to, to compliment or be able to show that we can actually do this and, and be able to get high yields on ufs technology because there are multiple protocols out there. The Sweet Spot right now for ufs is 3.1 and about 128 gigabytes but there's already. 256 is out there, that's 512 is coming and 1, terabytes coming in 2027. So, um, so the unique thing about this is we were able to book and ship within the quarter, you know, a decent amount of those systems to help the quarter. Um,
Speaker Change: So so yeah that's that's that was the big help there.
Speaker Change: Okay. All right. Terrific and then um you know, sort of getting to the gross margins. I guess I'm a little less concerned about it but um yeah you know, you know, quarter to quarter but but tell me about the spread of spread of the margins across your products, you know?
Doing true activity, based accounting on manufacturing, understand the exact margins of those products and look manual systems are going to have a much, you know, like sockets, very similar uh margin to sockets, maybe even more because as we build leverage on the platform, we can also increase our pricing and that increase in pricing. And, you know, as I looked at how we price things, you know, we we tend to mark up the things. We don't make pretty high, and I don't think we mark up our core platform where we invest our Capital High Enough.
So we're going to start breaking some of this stuff out just especially internally so that you know, where we're spending the money, accurately shows the generation of Revenue in the gross margin contribution, to the company and so you know, then when they talk about investing in the core, people will get excited right? Because they'll see the real value that we drive by making those Investments. And what we do which is building programmers, it's not an analyst
Speaker Change: We do you know the the the PSV line is kind of aged. At this point it's been over 10 years or around 10 years since the first PSV was announced. We are looking at new automation, uh, designs now. And we'll start hopefully a project plan by q1 but we're going to simplify the systems um, and by simplification it actually leads to a much lower cost.
So we'll have increased margins but we're also looking at the market, a little differently than putting everything in 1 platform and 1 machine. We'll still make probably the 7,000 we'll do some advances on it, change the smack head so it will increase speed and up. But when you have a large system that moves in multiple directions, they just will tend to break down more. Um, is, you know? And and we try to give customers the the right information on what to maintain, but they don't always do it. So, by going to a single Gantry in a very high speed, pick head, we can get probably a lot, probably a 50% increase in throughput.
Speaker Change: And a machine that's far less to build and far simpler to manage and so and it has a smaller footprint. So, again with these are just design thoughts but definitely doable and what it does is it should increase uptime for our customers.
Speaker Change: But also lower maintenance costs.
Speaker Change: And higher throughput. I mean, that's a pretty large value that they get there and then the second part of that will be breaking off some of the iOS and put that in a separate system, meaning marking and taping real. Taping real will still be able to go tape to tape or trade to tape in the programmer platform, uh, automation platform. But there's a there's a real need for a system that just does those Services complimentary to programming but also individually in their supply chain. So I think we can put a package of 2 systems.
Speaker Change: That marry up to each other, that provide customers a wider variability to manage their supply chain. Like if they had parts that came in and some of them were bent in the the reels they could run Vision inspection on that machine and not do programming. So I think it expands our our Market as well, in Automation in general. Um, I mean the whole purpose is on the programming side, but you know, why not have a machine that's Universal. That's, that's got a good price point that you can do other services on it. The programming houses will love it. The contract manufacturers will love it, um, because they can build that into their supply chain. So,
And once again, if you would like to ask a question, please press star and then 1.
Speaker Change: Star and 2.
Our next question comes from Jorge Mora from perto Ventures. Please go ahead with your question.
Jorge Mora: Thank you. Good afternoon, Bill.
Jorge Mora: How are you?
I'm well I'm uh first I just want to say, I'm absolutely thrilled with the uh the team's energy and the big positive cultural shift going on there. It's it's like an entrepreneurial startup and I'm just thrilled about this. Yes it is it is I will tell you I changed the work from home policy a few weeks ago, not everybody loves it but I will tell you in the last 4 weeks it's amazing the amount of collaboration we have. Now I've got the software
Team in here all together, they're here on fixed days. You can see the collaboration growing which is it, it will just extend into the value. That will be beat. Um, driving in the second half. I mean, some of the software teams came out and fixed the old product. When we get this thing out, there it is, the amount of value that it's going to give our customers is a, I was just blown away when they did the demo last week. I mean, it's it's pretty special what's going on in the building right now?
Here. Um, a couple questions 1 is um
Speaker Change: On this 1.5 1.4 million EV order from China. Uh, what kind of penetration does this represent into this company and does it meet all their needs? And what does this replace that they were were using?
Speaker Change: It didn't replace. It's, you know, obviously the Chinese EV Market is doing very well inside of China. And also outside of China, where they don't have massive terrorists, put on their cars and can actually sell them. So, you know, that is its they were an existing customer already had 20 systems. So this was adding to their demand so an existing customer. And that's why, you know, the configuration was what we expected from them. And price point, we kind of knew and look it was a great order to overcome the ufs uh, technology is something that they already use. Um it's also so that was 4.0 because they were going to make a new investment and the those systems are on a product that's going to adopt the 4.0 protocols. Like I said earlier in the 3.1 is The Sweet Spot today. They use that in our system so that as well and have been dealing with the yield issue. It's why we were they were like look, we're not going to place an order unless you can show us.
Speaker Change: You can you can conquer this and we did and we got the order. I mean we work the engineers work literally 24/7 for 8 weeks
Speaker Change: I mean, it was
Speaker Change: It was Hardcore and so and they they accomplished a phenomenal goal which also gave them all. The hope that we know we can we can conquer the 3.1 and all our competitors are having the same problems. Once we solve this yield issue. I believe this pent up demand and the 3 The Sweet Spot right now so I can't say that you know confirmatory. You know with with a 100% confidence it's just a feeling but I think customers have also held back in general offline. Programming until this problem can be resolved and they just managing through, uh they can get enough yield to build the products, but if if I was them, I would be happy either. But we're giving them a lot of hope that we not hope this, we've shown them that we can fix this.
Speaker Change: And so we're pretty close on 3 to, I would say we're probably 4 to 6 weeks again, that's just the range and it may be 8, but we will get 3.1% of this quarter.
Speaker Change: So let me go with that. So if you get to, if you get that solved and then the 4.0 like can you sort of describe that you can sort of the, what kind of dollar market opportunity? Does that represent for you guys? If you solve these problems and also does the profile of this solution have the same type of recurring adapter,
Revenue, or is it less or more about the same? Oh no. They would same adapter revenue and all that. Yeah, none of that changes. So if anything they probably would increase, obviously as they move into more of using ufs across your entire platform. But I'll tell you, it's not just Asia, it's Korea, it's Europe. It's you know, there's not much ufs, believe it or not, not a ton of Mexico but it's coming. So as more and more adoption of the ufs and nvme too, which is something we didn't have talked about before. But it is it is a technology that also is growing at 14% kegger. We actually ironically, the bench equipment was already here to start working on it, it was just just never implemented. So, so it's hard for me to put a dollars. Because, again, like if I look at the Korea, customers they bought 7,000, they didn't buy 5,000. So they would load up because they're using a ton, especially in consumer, you know, some in automotive, but in the consumer side,
Speaker Change: You're driving a large large volumes of ufs. So in Korea, they would configure those systems with pretty much all luminex. No flash for
So it it's hard for me to give you a very direct answer because it's literally region by region. And it's also Market by market that make sense,
Yeah. Suffice to say. It's a large opportunity though. Yeah, so, yeah. Oh, well, of course and it's totally like I said 14%, it's twice the overall semiconductor. Yeah, so yeah, it would be crazy not to conquer this. I mean,
Speaker Change: It was not solved. So and it's not because, you know, they, they would kind of guessing as to where they should focus to solve. And I will tell you from my experience of being intimately involved in this right now is that it's literally 4 or 5 areas of our technology and our Automation and socketing is a huge part of this, right? So contacting the device, and also the Lumix platform is 8 sites.
8 sites was okay with emmc not okay with ufs and so by the new platform goes down to 4 sites which gives us much more power to every pin on the device which you do need to access multiple of these pins, because you're dealing with such complexity in the device itself.
Speaker Change: so you know we can solve it with uh what we refer to as M8, but M4 will definitely be which gets launched in November but we're we've been able to do some pretty special things even on the existing platform like 4.0 which is fairly complex
Speaker Change: communication handshake needs. But I will say from 31 to 40 the suppliers themselves have gotten better cuz even some of them Implement these protocols in variable different ways. That's the other complexity, it's not the same across all the Silicon providers, some are really good at it like micron
Speaker Change: And, and I won't call out the ones that don't do a great job.
Speaker Change: But there are some that it's a bigger area of gray, so you have to have the right bench equipment to do that and to identify that and understand it. So, the team is learning a lot.
And I think through these challenges, you know, we're we're going to up our auntie in these um in these consortiums. We're actually going to be a real member of the these different committees and we'll have representation at those large committee meetings when they start talking about the protocols. And so, so we're ahead of this all the time in the future. So,
Speaker Change: And ladies and gentlemen, at this time, we've reached the end of the question and answer session. I'd like to turn the floor. The floor back over to management for any closing remarks.
Speaker Change: well, I just
Speaker Change: everybody to take in the time to listen to our Spiel. Like we're very, very excited about where we're going on. The team is, is energetic is ever. I think it it seems to be increasing week after week. Uh, we've got some people that retired and I put them on contract because of their knowledge and now they're thinking I don't know if I want to retire. I'm like sorry no kidding. I mean love to keep them around. These are people with 2025 30 years of of experience that's 1 of the other things that we're really going to start to drive. In our customer presentations is why do you choose data.io?
Speaker Change: I can tell you, Dwayne Jones has been here for 30 years, that's ten years longer than daddy frog 1 of our competitors even been alive. So to not promote that that that educate the knowledge base, that's in this building. It just needed to be unlocked and that's what we're doing. And I think it's obviously helping us solve these complex problems and, and get to where we need to go. But it's also driven a lot of excitement and the collaboration, like I said, we've got some interns in here now that are learning and that they're loving loving doing the business, that, that learning some, what they're learning, they love. Um, and some of our best hardware Engineers, we're those very interns, you know, 5 years ago. So yeah, I just think as we build more and more knowledge, we need to be viewed as the experts in this space. And that's what we're that's what we're doing.
Speaker Change: So I want to thank everybody, you know, it was it was definitely a hard quarter, this was not easy.
Speaker Change: The first 2 months were ugly and we had a great close to the quarter. My goal was to get through the first half a little unscathed I guess. And not too many scars uh because I know the second half is going to be better.
Speaker Change: So, thanks everyone.
Speaker Change: And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining, you may now disconnect your lines.