Socket Mobile Q1 2025 Earnings Call Transcript

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April 24, 2025

There are 4 speakers on the call.

Operator

Welcome to Socket Mobile Inc. Q1 twenty twenty five Earnings Call. My name is Paul, and I will be your operator for today's call. Before we begin, I'd like to remind everyone that this conference call may contain forward looking statements within the meaning of section 27 a of the Securities Act of 1933 as amended and section 21 e of the Securities and Exchange Act of 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.

Operator

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 availability of product components and necessary working capital the risk that market acceptance and sales opportunities may not happen as anticipated the risk that StockX application partners and current distribution channels may choose not to distribute the products or may not be successful in doing so, the risk that acceptance of Socket's products in vertical application markets may not happen as anticipated, as well as other risks described in Socket's most recent Form 10 k and 10 Q reports filed with the Securities and Exchange Commission. Socket does not undertake any obligation to update any such forward looking statements. On the call with me today are Kevin Mills, Chief Executive Officer Dave Holmes, Chief Business Officer and Lynn Zhao, Chief Financial Officer. I will now turn the call over to Kevin Mills. Kevin, you may begin.

Speaker 1

Thank you, operator. Good afternoon, everyone, and thank you for joining us today. Our revenue for q one was $4,000,000, a decrease of 20% over q one twenty twenty four. We recorded margins of 50.4%, slight decrease from the 51% margins in q one twenty twenty four. Our operating loss was $900,000 compared to an operating loss of $500,000 in q one twenty twenty four.

Speaker 1

Overall, q one was a difficult start to the year. Revenue came in lower than expected as we saw weakness in both our domestic and international businesses. While it's impossible to know for sure, we feel the level of uncertainty froze a lot of deployments and routine business during q one resulting in lower revenue. 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. As regards the outlook, the tariff situation has greatly complicated everyone's lives.

Speaker 1

Socket, like everyone else, has a very international supply chain. In broad terms, we source about 30% of our materials from Mexico, Twenty Percent from Taiwan, and about 10% from China, with the remaining 40% sourced in The US. So the tariffs do impact us. We are working with our customers to minimize the impact as much as possible, especially with our international customers. 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, and this is particularly true for our many retail customers.

Speaker 1

So we expect retail to remain in the current levels until there is more certainty and people can make and execute plan. Thankfully, we expect most of the near term industrial business to be in The US and less likely to be impacted by the tariffs. So overall, we believe we will be able to continue to invest in our business and achieve positive EBITDA results for q two and believe we will be able to achieve profitable operating levels for the second half of the year. And now let's turn the call over to Dave, who will provide more details on our progress in the industrial segment. Dave?

Speaker 2

Thank you, Kevin, and 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 the industrial scanning and handheld computing markets over the last few 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.

Speaker 2

Widespread testing is underway, and we've received purchase orders for a long term rollout from a Fortune 50 tier one industrial customer. The ruggedized scanning market is large, and our entry into this space will help us diversify our business beyond retail. We also recently announced the launch of the extreme I x g and I x s series powered by iOS and featuring a fully integrated iPhone 16 e. 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.

Speaker 2

These products put Socket Mobile into the $27,000,000,000 mobile handheld computing market. Our ExtremeScan product is comprised of three different configurations, ExtremeScan case, ExtremeScan, and ExtremeScan grip, all designed for iPhone. And now we're offering models with iPhone 16 e inside. ExtremeScan 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 environments.

Speaker 2

Beyond new products, we're also seeing our investments in our customer and developer experience having an impact with our partners. 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 platforms. 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. With that, I'll turn it over to Lynn for more details on our financial results.

Speaker 2

Lynn?

Speaker 3

Thanks, Dave. Revenue good afternoon, everyone. Thank you for joining today's call. Revenue in Q1 decreased 20% year over year to $4,000,000 from $5,000,000 in the prior year quarter and decreased 18% sequentially from $4,800,000 in Q4 twenty twenty four. Gross margin for Q1 was 50.4% compared to 50.3% in Q1 twenty twenty four and fifty one percent in Q4 twenty twenty four.

Speaker 3

Operating expenses for Q1 were $2,900,000 compared to $3,000,000 year over year and $2,900,000 in the preceding quarter. We recorded a Q1 operating loss of $900,000 compared to $2,500,000 loss in Q1 twenty twenty four and the $400,000 loss in the preceding quarter. Q1 adjusted EBITDA loss was $485,000 compared to a positive EBITDA of $40,000 in Q1 twenty twenty four and $140,000 in Q4 twenty twenty four. Diluted loss per share in q one was 13¢ compared to $07 in q one twenty twenty four. Turning to our balance sheet.

Speaker 3

We ended the Q1 with a cash balance of $1,700,000 Cash outflows included $700,000 for operations and $50,000 in capital expenditure. As of March 31, our inventory level net of reserves stood at $5,300,000 compared to $5,000,000 at the end of twenty twenty four. On April 21, we renewed our $3,000,000 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 3

This wraps up our prepared remarks. Now I will hand the call over to the operator for questions. Operator?

Operator

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. And once again, let's star one for any questions. And it appears we have no questions at this time. I will turn the call back over to your host for any closing remarks.

Operator

Thank you, operator. So thank

Speaker 1

you for participating in today's call, and I wish you all a good afternoon. Thank you, and goodbye. This

Operator

concludes today's conference call. Thank you for attending.

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Socket Mobile Q1 2025
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