SONM - Earnings call transcript Q4 2020 | Sonim Technologies, Inc.

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Operator

Good afternoon, and welcome to the Sonim Technologies Incorporated Fourth Quarter 2020 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Matt Kreps, Head of Investor Relations. ahead. go Please

Matt Kreps

welcome for and today's Technologies' Sonim Thank fourth everyone quarter call the XXXX. ended results you, to December XX,

on future just remarks events to reflect discussed on obligation results, and law. circumstances revise only live statements the after date or plans. required cause which information from broadcast, call, discussed the by to days. by materially actual from expect filings, call the operating certain or any Certain management's of that or release some today most belief, except These we press website under no Sonim's this risks, report forward-looking with projections in most discussed assumptions of including that Exchange results note distributed release in statements conference on update link. on predictions statements. the Please file on and the forward-looking sonimtech.com next Those these include statements this the Sonim the SEC the our implied report about to and XX-K, in recent Form And difficult subject March those predict to has risks business Information statements Investors recent estimate Commission. uncertainties, as reflect will call. to available the X-K XX-Q are and the and undertakes to as be includes which and of quarterly and differ those are are Form date few stated XX, will of goals documents are forward-looking press XXXX. annual this of forward-looking These also strategy, financial the and Form company's may events, and are Securities Sonim future filed assumptions and its and a that historical financial

Now, over call to Wilkinson. Tom I would like to turn the

Tom Wilkinson

calls. XXXX online. to call and transformation communicated and We've changes our of more joining deliver our was to to global as implemented transition that us a hello quarterly was diverse and range geographic in about and addressable of on transformation everyone Matt, scale. products position for operating prior opportunities costs a a XXXX that lean Thanks, we've the us big A year a on and part moving model. reducing new broader on flexible operating and to business of markets

initially development, agreement accommodates forward bulk including product struck and the We most of minutes few efficiency continue a entered ODMs on great would with December, were a This to recently path in in previously most products. current an that more operating pieces our agreement reductions of software costs been that spend future be which that creating to of costs team the with to made believe for have recent fixed services what the costs an India, in business. higher basis. software variable direction. of into to will are configuration. puzzle, providing working cost within for agreement in and In the strides and of Most which our transfer on software we Coforge favorable of we lower I in like their shift company's company advantage completed have

existing partners. expect manageable saving second and we Unicair, of customers. differentiated and Overall, resources cost We more our a as software predictable one we more costs SonimWare work software for work the while our supply also within products. to the Z-Axis our In manufacturing move, assembly have retained outsourced company, the chain supporting our to our such perform work necessary our MCPTT,

shut but clear unit. the down we were our down next, quarter manufacturing. high see compelled have able contract resulting to we to the we XXXX, we of in help manufacturing from quarter one for production, shut a per costs would to cost stabilized much In XXXX we higher normal system contract moving than demand solidify costs, experiences our Likewise, Our need at also were a favorable in first fixed from we in unacceptable manufacturing, experienced in-house per our believe variability variability a to rate. as the costs unit. not in By cost

of we it comparable the in partner life stay Our contract for cycle to has that will efficient of way products. more our a our manufacturing And existing our unit historically locked level expect cost the that assembly at products most through of existing per quarters.

with same units by ODM manufactured results. Our our the plan future stabilized that partners is

a products. new of we the shift made have increase use in to Third, ODM partners

Our partner FIH for partners And has talk I development rugged smart and rugged UniStrong our about FIH, tablets are current subsidiary our UniStrong that is in a that been will moment. feature and Foxconn. announced rugged phones. ODM we released next more on scanners generation a just our newly of working

an these with on working partner, to leveraging partners. own our balance volume many existing development are larger of as leaning chain, work both a with as advantages relationships well ODM's enhance invest ability strong to their product developed There the have ODM and development sheet supply the including efficiency. We to in

directly quality. as receiving in process to to and our we particular well are our from While expertise as software differentiated attention our both and support the engineering hardware are add partners, involved excellent engineers whole

market. six-inch new including I'd centralized these which the platform, of our from of devices product our will provide function larger Scan, current Now supporting This Sonim and management the ship first are of our scanner smart RSXX also our of focus but key data. expect and and stand-alone compact the with that LTE more and QX, Wi-Fi The its by rugged barcode In be computer eight-inch Scan, began We've a integrated a SonimWare products, scanner, about the we future connected enterprises. and screen is talk missing software, broader both larger we shipping exciting in the a configured RSXX. barcode to configured RSXX, some is scanning integrating screen. a and LTE range version with suite or SonimWare functionality and this scanner by are Sonim user experience voice handheld to Also growth. like data with deployment screen rugged QX, are for of for By is the Sonim’s for will collection. sibling, providing on similar developed connected to to

a has You certification. I quarterly flawlessly. RSXX for conducted that submitted recall might performed AT&T our using results call last RSXX The model to and of been test

Many about generation dependability We our of that feature a excited focused our want the voice the ongoing ultra the with are products deliver features value. phone Feature work durability integrated feature PTT and phones are of very volume phones. Sonim’s rugged highest our with next without products customers opportunity particular complexity of the rest of will XXXX. and starting an the smartphone. phones a is A from not consistently full address while get reviews they are positive strong That currently support Europe do highest world. our volume that customers, in feature use or note, in we customers

for where well, will of moved from and to for next deployments bus of generation areas and for have utilize over support, usability in This includes new network world. new on requirements processors Our from expanded in especially feedback new our communication, deployments. in performance both Europe. like We phones towards next moving devices features customers America for security is push-to-talk These cellular a North also a rest strong cellular. the well XPXs industrial radios done is growth Europe carriers school have the and area phones and our generation number include and the additional increased as customers. feature as push-to-talk commercial the over One to feature and current based in projected U.S. years

next-generation form to We expect first this release phones the third feature of in of to quarter and follow. year our additional factors the

our a LMR features incorporate design, to network we into the particularly in user can during that that incorporating more number push-to-talk are competitive our customer used device to the capabilities even to market. of be We’re who into certain for

are We the chip to great technology rolls was around to availability, evolve our as set deal pricing. XG. the transition costs, outset, continuing of it new end out At a and rapidly world. around our uncertainty continues This functionality to product work user there

engaged of in that better potentially We position be market we the of we’ve customers unnecessary not advantage would As to we on long-term. ourselves rush development making XXXX, and most user the costly XXXX take understood off or XG performance made the end process, to purposely in our to able our if held choices. for a wrong

known is the XG seeing in roadmaps and the However, own that stabilization advices we understand at upon to are capabilities, along Therefore, future, some we SonimWare right generations on are is in are for future our we technology the and to the XG. choices engage XG released ruggedness industry-leading with that we be mobile functionality also engaged Based Sonim starting time. processors, with to chip see bleeding the from that important for. it’s

Bob here our cover Then our and stop Sonim. for the minutes me continued Let about ahead a results. and I strategy of to transformation more will share ask few financial

Bob Tirva

Thanks, Tom.

XXXX XX, of revenues Our of fourth in of to press $XX.X increase was to the the smartphone. website. of XPX Relations primarily results A The increase Investor increased today, our December an the million. issued release XXXX. our in the for ended is earlier Net net for quarter copy quarter announced release sales the fourth in available attributable sequential revenues section

fourth product. system, a quarter. Android recently XXXX of or extended As the down which was versus a on of XPX mentioned life upgraded net prior offset decline phones the of that quarter, the partially XX.X% increased net in unit was our XX in was of prior $X.X Shipment basis of over for this the XX.X% sales the XPX unit is of which operating our basis revenues, about prior call, on quarter feature million in revenues from XX% by a the of has to QX. profit approximately by Gross XX%

benefited expected We impacted discounts negatively products QX rising margins As of XXXX. legacy as were sell stabilize than our in which ship last were that that new in that products, in Margins component end approaching our required for life. quarter. from anticipate to discussed call, throughout on will QX rebates lower by certain products and to margins are our the begin prices customer

improved our operating from by driven the a products. reflection over QX next-generation our operating million. $X.X was level. for increase for commitment the $X.X compared and maintaining represents in in increase primarily million a by to fourth of accelerated compared the which Net the which third of of the $X.X loss loss of and a reflects QX, the of sequential of has an third quarter million $XXX,XXX in is expenses. date. operating $XX.X the expense of increase net year-over-year efficiencies in net to million a offset The the Total Sonim in The a XXXX SG&A, expenses operating model came at This Looking decline quarter continued is to XXXX. to million our $X.X of result R&D The loss was net model. in decline development XXXX partially quarter lean implemented of totaled a quarter increase loss fourth at

Turning to sheet. the balance

effectively as a for $X made million settle litigation next few December remain at our decline develop balance over to was cash products million primarily ODM debt payments the well net Our as our the for balance to we $X.X quarter, free. and is attributable The payment $XX.X quarters. million to our our loss end help next-generation our partners of cash the of in securities

of our As products, our execute to operations and we Tom given capital mentioned, have strong develop next-generation sufficient we balance improved sheet, plan. launch and as XXXX we believe our that

not As guidance specific previous will providing we today. in quarters, be

However, that to by we beginning the RFID our ship. our out continue like to while wind are to in of products next-generation the down March just point products, sales led would I legacy

seasonally some quarter comments. back factors In addition, I Tom a for line for the to growth These our impact now low will over business turn QX could in is historically. top near-term. our it additional

Tom Wilkinson

the at We're point we assuredly we the business hopefully pandemic year pace the taken our announcing influenced pandemic. end of as gotten the too, Bob. The we transformation. have transformation where company of itself. have by through you, Thank COVID-XX are of changes, through was But a operational the

story will build company now not cutting. reorganization forward, products we through will cost expansion. Rather, Going be Sonim the and about and our market

addressable barcode market rugged our rugged end quadruple and the our scanners, tablets refreshed of XXXX. cell New rugged by phones will

inside centralized efforts sales and expanded Our team growing. has U.S.-based are have Europe, team a started our we marketing to sales

my expand geographical We to business. relationships channel in leverage have part distributors rugged our the of a partnering been key our reach pioneer with with partners, and to operating key success

and We product expect for people investments will these and future leadership brand in and rugged create electronics. expand growth recognition our

tools our focus responder intend reputation software ruggedness work we base. and order we industrial market, to our customer to remain to first While our lean and our innovation in on research enabling devices maintain resources bring development, to for new for and and

paying with to U.S.-based also to customers. Our large as this rugged long able One dependability that X,XXX up-to-date from a revenue as and is off. decided lasting but refresh something models, right at recent to look is company has example recurring be stream as having feature phones satisfied Sonim product, rugged

more We to and our already the Operator relationship will excited sales this as our historical for for opportunities expect systems now and made I that, Q&A and back such ahead. session. to investments to With it and ready find develop team development customers. The to Sonim turn is we've marketing the challenges with with

Operator

go ahead. Instructions] is Our We first Mike question with Please B. Crawford will question-and-answer now session. Riley. from begin the [Operator

Mike Crawford

channel? recognizing the sold through and if such any on in the back you for talk about and further, potential give half could the into Are maybe Thanks. expectations tablets they're Can new business the go you of year? through channel model as product works revenue this revenue of when you commentary how the

Tom Wilkinson

question. channel have partners great our agreement. of So their unique own Each will

that an to to into as us recognize is revenue Our agreement would ship. we enter goal allow

pretty We how unit can RSXX quote the the through we inventory to Bob type year, With for the of Tirva, but another regards particular but amount an sales swiftly to I our as – future much of basis, of any so and and to have can a an time, the kind it the to half we way. don’t on in our QX ship, close back partner even we for would not too our give the be CFO, we QX. We guidance work very end would a have hold shipped we we’re that work trying looking would agreement that able one – and RSXX well. all RSXX we’re on kind And of reduce gone of manufacture. much believe for to on later ship-out shift this – quickly, and distribution out those, be both ship So we should it’s month, coordinate, report turn to that should sold arrangement. of that been then by to looking will have have of the at

Mike Crawford

two kind Scan. related Sonim questions Then, Okay. of on the

Is software? two, your element And of I could proprietary to some attributes be Scan? So, there one, that element what of the are recurring this revenue true? think then – a Sonim

Tom Wilkinson

Well, is have intrinsic Scan, on our revenue of XTX, as technology recurring device. basis scanners, functionality barcode a to actual we with, rolled Sonim for which a camera it’s the out capture the we’ve

offering Scan, any products, barcode us, they for a revenue to – them to is be not how function swipe. entire offering it’s Sonim stream of we new Scan preferred the tied a in But we’re into a basic because is and because manufacturer scanning – not we’re loyalty suite is need for Sonim SonimWare which So, create Sonim the SOS. customers, expect

the managing thousands that of our tools the in us will help would software all deployment. what of products. the go-to and of of them for the with time that use And we their expect again, hopefully centralized and devices ease choice make be offering – We’re time field

Mike Crawford

Zebra forward or Okay, there might points Is you. someone is or then you’re that strategy you what pretty more be an I great. introducing to that pricing these from – entry is Thank question strategy? price the new relative And disruptive out products believe else. of that going last do

Tom Wilkinson

we design price I as permanent here on no, mean, as an differentiated could basis. is what opportunity product a differentiated as be we that Well, saw well

we’ll it’s successful to be We this be in believe and able of thing. just no, space short-term a so be sort And that long-term. – not

Mike Crawford

much. excellent. Okay, you Thank very

Operator

Instructions] with [Operator question Martin is next The Yang Please from Oppenheimer. go ahead.

Martin Yang

know, Hi, future the to arises? question. effectively verticals address basis, you? for Can you provide you opportunity savings a the how taking maybe, more afternoon. new Thanks my allow the ODM you when good about does And like-for-like model it talk in on does operating for

Tom Wilkinson

great a question. That’s

XXX,XXX biggest or costs produce we produce the the So, unit. ability appropriate our unit a to can one the of price can a in variabilize is difference our and XXX,XXX one units. ODM We to production. is from

have all we in that at to been going over see past. we’ve our when the So, not manufacturing variability we’re costs seeing under-capacity the in quarters,

we do top really there an purchasing for as could on that, costs than and phones we use therefore, supply working making with own on ODM, other to supply and the their their Now, example, out work people. devices to numerous can of lean an chain and chain are companies with ODMs other purchasing possibly ever we worked FIH, when our cell product we their with larger in with us lower get internally. just upon larger our working

So, those real are the on profitability. issues key

this Bob I thoughts has well. as think on some

Bob Tirva

I side. Yes. goes on R&D add just same that would the the

So, spending we are R&D with products staffed employees working have reduced. were our ODMs past, get the the will once company. in be that spending, market, those currently, out in are the quickly. those out to a the And in products within small all company, new spike because the we

you forward to same areas. won’t that key out, across products be end carry, a So, and of keep continue it though. much the going the would other you base cost saw the at the for that board maybe, the as the that with to you’re case wouldn’t in our to get to differentiate resources we when It key day, than us product be that carry rushing the you new have still, you’re contractors but cost supplement

Tom Wilkinson

to does that’s not And if want or you create number end think by to hire Yes. guess, was working get we’re limited this everything you with does And into ODMs which obviously can that a a have that your work engineers get can trying to new completely could how I up; inefficiencies ODMs, really with I we around the question, some can be utilized. of where part expansion. having second help in-house, to had by having product areas, and you hire you people ODMs. multiple we impact,

work we with. with can products in now. come further that the doing are excellence that We’re the the who ODMs, and we up of specialists field their

Martin Yang

Great.

bulky be when that I – vitro So, in the developed products so – that sense in product cost a is, cost will a the or ODM describe the the the accelerate regular, all mentioned R&D maybe, are the outlay a certain temporary is could with – cost out out spike characteristics spread beginning on are that of there’s being a projects. the and follow-up the then new you put with more you more to with or partner your sizeable project, there and ODM that share in flow model they the Bob cash through associated – ODM developments, think more in of you characteristic the try can

Tom Wilkinson

less So, that A be. would to into part own much the of the ODM’s is product I’ll their of the – cost efficiencies is are part investing and that the development to but kind costs themselves. the is us is that theory, let in of we’ve talk Bob internal they total experienced development what of timing, consistently than our it to a overall and

cost. incurring not the full we're So necessarily

Tom Wilkinson

we kind all have time as think one it product number next out. get the project we're start develop as where same one the a on trying versus future we those to as I timing itself. market hope of getting products just really to and to And the out to depends at far of a goes, smoother the

might try launch into so and cadence more moment. that see tend get spikiness – to And then regular these at the development to a of you you we

Martin Yang

versus you highlight competitors and milestones – you is against your will itself address, it. regional sense. be for Got expansion, of key differentiate is can last also potential in question Europe? on year those My should geographic plan there we to a Makes competitors regional into for, running the rest watch couple and maybe the how any you

Tom Wilkinson

Sure.

sort in So form partners, and probably do our mean, I the hiring, to but watch you're is you where regional things resellers be in partners to first I able addition the of for of efforts think of can have of underway. start. don't thing hiring continued see we that going that's distributors, us the

us revenues professionals we'll the sales – ultimately for to reporting ramp in a into to – going territory have of two new we're regionally sales and have is progress, now right but able have Europe recorded to it a in get in going see we've everyone we mean and that for be we'll Britain started, we be now I expanding. QX. Great do We're lot We Ultimately, have be ways. our to

in unless we competition products world, as product, they than is is be small consumer But as regions. competitors is as the see the them products quality strict everything now, in are sold. well. the we're and seen goes, these them U.S.-based far we're as promising. States, devices. So We don't other bought a product not branded are in far business unlocked that differences any on and rest more as to as the in a of see our count world exist there over actually believe as in different North And we our all regime it looking world, American much as the much a as numerable as products, do very are The part selling of but are of premium Amazon. advertised just that United There quite product Europe lot

partners any more the, that opportunities, products and have against. might helping believe functionality our are – run we So be us will they than in clear of competitors more identify truly large-scale differentiation that will the our we the up be rugged

will opportunity, get North we America. be be and So successful we of confident we're outside selected as that

Martin Yang

Great. Thank you.

Operator

for question-and-answer closing would turn the Tom like any conference remarks. our Wilkinson over to to I session. concludes This back

Tom Wilkinson

joining us call today. on our you for Thank

happy call would events releases any participating throughout like be will reach with management, a to a end, may number by information conference investor today's arrange press Associates, arrange occur. on We Darrow conference announce Operator our now would is and press of is you to these attending out for of you. please if call listed in to needed. contact be year and If We The you we'll phone Thank Kreps presentation. releases. Thank a his Matt concluded.

You disconnect. may now

Sonim (SONM) 11 Mar 212020 Q4 Earnings call transcript