DAIO - Earnings call transcript Q2 2021

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Operator

Good afternoon and welcome to the Data I/O Corporation Second Quarter 2021 Financial Results. All participants will be in a listen-only mode. [Operator Instructions] Please note, that this event is being recorded. I'd now like to turn the conference over to Jordan Darrow, Investor Relations. Please go ahead.

Jordan Darrow

everyone. welcome and you Thank This is results quarter financial Corporation Data call. I/O conference second XXXX the With Anthony Hatlen, today I/O. Data and me are Financial I/O Officer Chief Chief Corporation of Executive and of Joel Officer Chief Officer Ambrose, Operating Data President and

update filings these and unduly forward-looking I/O time orders on deliveries of of of The acceptance we those statements. new forward-looking overall, with financial remind upon. revenues that and for any position, tax which XX-K market conditions, impact and not in factors to as impact known like and markets, ability other may products, by supply upon risks, in communications. and record in statements events and activities materially releases company Securities recovery of include future company's duty activity revenues, involve reform, level under to should concerning and may no be from levels statements, be results prediction competitors the that Forms market Commission, other statements. are accuracy described a pandemic, of performance of among new along statements and the conference from statements economic within other the actual semiconductor press the call and to COVID-XX, base, risks, chain I'd industry such to customer based reopening product differ which and results other and timing begin, to or made economic Before is uncertainties as you conditions with our this Data and any the industry and These the factors from installations, cause to the time partnerships automotive efforts future expressed releases, continued forward-looking product from operations, estimated uncertainties and and construed the changes other of those of the XX-Q COVID-XX unknown relied by Exchange implied demand, pricing or completeness including

over would Now I/O. I to the President and call of like to Anthony Data turn CEO Ambrose,

Anthony Ambrose

year thank begin I'll for Joel second it my we in addressing operational I'll discussion financial XXXX performance by technology to last In turn key period more Revenues XX% our a quarter up also a adds were from XX% number quarter. achieved million, same platforms. much, We of highest and then metrics, significant four nearly had revenue XXXX X.X detailed period momentum years same Hatlen numbers. last XX% and experiencing Bookings over the the you Well, growth. from formal performance and QX, surge level in we reported bookings the the of and for on our and very up years sequentially. Jordan. in $X.X milestones remarks several the in million, first highest year. began QX the to were and the

our were wins, trend the for customer in strongest our repeat When bottom as two the quarter and capacity and XX% seeing the existing when you all it is ago. at everything, we're total business industrial that backlog demand since at seeing year with excellent and in seeing $X regions look and additions acquisition you new new the break a customers. also strength as quarter about down, been QX well We're performance electronics continues worldwide. ended Automotive million. sales location We we've automotive of electronics upward XQ of a in years

memory. QX having quarter the in and recent ongoing installed growth, recovery Our a globally consumables in base is recurring revenue also expansion the driving significant largest with

new we the first wins new of had we the customers quarter, following quarter. won the number Within again in six same

to due market all these gaining us could of is support choice support, product be programming performance, our combination innovator supply Data capabilities, a our our increasingly conclusion I/O factors. worldwide. Our internal show they and global strength, metric of or excellent sales the secure in service chain Together share our financial This our XXXX. that

Looking very significant platform, a quarter. our we security SentriX had at

Our Asia. scaling a whole is is quarter capital for the on progress. platform. strategy first application can PSVXXXX our In are first and conversion for us in new we in we of extending sale upgrades field to platform exciting and the at and we channels. reach the second win PSVXXXX completed center XXXX EMEA and intelligence equipment applications to for the PSVXXXX and of the artificial QX, We've platform in booking SentriX also the the breakthrough upgrade SentriX This simplifying our demonstrated region. our showing additional qualified also and had of In programming SentriX partner a SentriX to an sales SentriX a field,

the continue in long-term double-digit While automotive over believe This QX is our semiconductor next to the decade. we outstanding, market growth growth in drivers. is

intelligence also increase growing market base. artificial industrial consistent on and absolute percentage in grow track We and the with adapters revenue XG, our industry we're in are industry recurring believe continue and services is reporting. business a large strong see also This to in We're also test installed others across growth terms, in very our as and IoT. semiconductor to

XX in performance seeing multiple challenges freight across at movement, demanding I/O Data conditions and markets, regions companies. our some supply Moving and cost. We're in is This supply our seeing predictability we're operations resilient of cuts the not in chain, and least years. unique also chain most a and issue over to

successful year customer demand of handlers and in by This Our us purchase front our has strategy assemblies. family been and expected our programmers associated meet on and in the across our commitments QX components upturn very helping key get PSV was to and adapters. extending late of last an

to and well customers be and are all order prepare entering of not the chain shortages Despite million advance. growth the modest specialty we We challenges. supply new revenue supports, as on in had supply backlog challenges, device in they an some as chain cases, QX. ship orders new $X items contributing Chip we we track on some we're may quarter adapters qualify have the where and designs custom second experiencing the sources delays in could excellent vast reaction actually and to to majority

talking and about vaccinated fully COVID-XX the and our facilities compliance Finally, our of is against fully items, staff Over are Redmond COVID is safe XX% operational. other the team virus.

you're Because layoffs gas on off pedal and Our for we've without our paying our functions, strategy experienced maintain and rapid workforce ago, talented workforce that today. we support the maintaining is across COVID a in of the to the year in turnaround. step now our our able been seeing depths surge

Data the right a partially work think permanent we've team hybrid the remote our in formally We've developed Redmond this with to back balance. be the we and several office with Moving converting as model more I/O members more over discussed into office. positions will bring the months people forward, fully and past

starting implement to September, restrictions expect are not governments. model this local We in COVID-XX by re-imposed assuming

Moving and forward very to from excited by half COVID the of backlog. we over rest booked approximately increased million first depths enter year $XX for the back we outlook, XX% and of good ago QX progress orders bounced the one with year-on-year. business where the of We're very

ready to We continue deliver this to and be have backlog. been

framework Data to growth in we sales profitability goal. disproportionate within Joel our growth performance long-term look as As remains us two-key of this Joel? it security advance cyclical flow, well-positioned and out, recovery really to cash continue a that, I'll our we forward double-digit this Hatlen. a trends improvement back deliver bounce settles turn extremely longer-term and from share more and of growth, helped market COVID toward to With globally. over growing

Joel Hatlen

everyone. to and Thank day you, Anthony, good

financial clearly has model. in our a bookings backlog, to good and revenues, our financial time with performance As it's growth advanced review

try information in business. While our we modeling do to not guidance, give revenue helpful provide we

channel quarter, approximately of gross be are lead believe and be continue forward. be mid-to-upper for invest balance consistent consist taxes innovator. mix. expected should income R&D improve pegged the we the what an is intend product the expected our industry side, Taxes to US X.X remaining million largely no to on foreign with US with margin to NOLs margin mix, per the profile we to to Operating On as due towards will since taxes expenses extending commissions. year carry at the variances range depending sales XX fairly although of may maintained, will and

addressing the usage, increased growth Revenue second period Turning reflects quarter of in from throughout activity quarter our and sales in in of associated higher QX the of net second a the We million X benefited in and of from chain the period. with in just XX% overall base our discussed. sales the this compares of geographic sales sequentially of international second equipment XX% as XXXX XXXX XX% conditions. represented up demand challenges, quarter primarily business up the QX compared for the the results. in and higher amid growing semiconductor reduced X.X XX world, prior the level second customers with has machines for The year adapter highest quarters. supply Net quarter Anthony revenue million, also to million XXXX to On the from were of sales XXXX. installed X.X COVID increase had basis, XX%

a June XX% the Second million at million, X in quarter due of Gross backlog a bookings million the reached XX% greater period. XX compared and period. is the in XXXX. on the up year funnel XXXX as was million X.X primarily The equipment with amount in Operating second the X.X March third XX.X% as from XX sales, December up prior prior were and strong at in second XXXX as at X a entered XXXX typical capital at XX Adapter XX% million Backlog of quarter X.X We X.X as compared the sales. quarter year. factory up XXXX first year X.X and in bookings XX in as of from in expenses were as from decade. XXXX second of the higher was than quarter million from efficiencies quarter XXXX the quarter well have million the X difference million of up floor with the earlier highest sales for X.X of well. the higher the of a of March with percentage X.X million, quarter of million second XXXX quarterly margin, of over of to

quarter our approximately including cuts, pay quarter COVID this programming demand period, current equipment profit. second operating each an recording second expenses between XXXX due accordance by prior XXX,XXX and net expenses our the of was - sales the and to associated the share primarily X.X year, zero mandates control Accounting R&D general, year compensation, XXXX incentive in sorry, with our assistance from company second of actions, with with for operating climbed million and For the as lowered to year, the higher efforts administrative the to to quarter. of costs executive was the back. in between government or in approximately vacation benefits loss Within for board commissions in quarter and netting million cents I'm first revenue as reflects and remained XXX,XXX Principles performance-based GAAP expense of XX,XXX expenses, selling, quarter higher per furloughs actually, the XXXX. the In or foreign Accepted the comparisons stable returned by continued X.X loss increased Generally

in Deferred quarter. XXXX XX fulfillment or X.X the day collection XX inventory million edged of million at of for first XXX,XXX the very of growth. we company which during us of invest Overall now the that up June much working at the DSO, higher days. June was of XXXX into funding end to slightly strong end Net was the capital in the the at Data chain our at from with financially XX, XXXX XX.X on Moving to was balance March. million end remain million million X.X X.X business resumption part backlog. be at which the of XX, March, XX.X to at no at and and remained revenue target of growth continues to our below approximately have is supply strong million XX our $X positioned finance cash from quarter. at backlog to of Inventory a the going end of primarily end the receivables, downturn, quarter, debt. up quarter to allowed financial measure of customers The second the higher June measure, XXXX, associated million with the outstanding I/O's sales XX.X preparing condition first at at sheet, than our third the down resilient XX from million, the has receivables of June of us

begin will had to concludes my and of Q&A will the process? start I outstanding XX, you turn the segment. call Finally, as That question Operator, XXXX. operator remarks. shares to we of the X,XXX,XXX please back June the answer

Operator

[Operator Schmidt Instructions] Please Our with first question comes ahead. go Street. from Lake Jaeson

Jaeson Schmidt

taking want guys thanks guys, did to significant It I impact. with my your start like in Hey, the sounds chain. remarks for any questions. you not just see supply prepared

the expecting sort in Just curious any truly of and if QX. that if was impact here you're case

Anthony Ambrose

the thanks question. Jaeson, for

your is think assessment I correct.

The We back. seen haven't lined is bounce up beginning the impact I to the of think some freight back. we baby the forwarders, like sure to large it's We we're chain, a we of year the expecting quite of taken the components that. had substantial supply expecting any don't the were that took running, bounce things of keep operations have very at a effort sitting key because impact. as we from amount steps make right seen the machine team proactive the babysitting

protected sense. lot were it's going. keep well-oiled covers just we to in a machine the of that But the going work a of So lot under in, effort

Jaeson Schmidt

in you I customers? if just that's your those increased freight but of sort inflationary you're curious, seeing know, pressures and to other costs expedited if mentioned so, along general, Okay, And if helpful. passing you're costs,

Anthony Ambrose

increases on Yeah, from And tight that chain. time and we costs up. supply price price keep we're the go time evaluate as starting we we'll the see in to to eye some that that. do increases And

Jaeson Schmidt

queue. accomplishment nice that into with me and jump system. Okay. back And I'll for SentriX first Really one last the

from kind curious had them customer, long of formally, been initial the kind conversations you with Just with this system? engaged going to how of

Anthony Ambrose

to maybe more, got bit bit a quarters, the it. probably order about I'd two it's but time little say talking started I'd time it's been, less, order, we say on maybe from purchase the the of we a the that's little

Jaeson Schmidt

lot, a guys. thanks Okay,

Anthony Ambrose

you. Thank

Operator

is [Operator ahead. The Instructions] question next Please Thompson go with Aston Jeff from Capital [ph].

Unidentified Participant

see questions. Joel, through you Please believe and for to model. operating have my that come so your can how taking Anthony leverage, guys, I Thanks, walk really through. strong financial want us

Joel Hatlen

than I that to think during Yeah, section that XX% mid-to-upper in And the conversation range. that, as actually have margins we we of on and expect, with stay product the my could the our depending started gross channel on mix better be quarter.

negative what sales we've been pretty quarter, volume. exception expect will the that I much taxes foreign range. million any this We in to with line higher because expenses foreign positive we unfortunate the an income amounts be X.X or currency think relative no with operating but NOLs. again our piece be US entirely think R&D, our the will be taxes this will be where that and taxes to was don't consisting we of pretty selling commission around a the do forecast item really ever of quarter stable at with

of So the basics that's it. really

Unidentified Participant

you generating as want you start stock you around any we When have the run XXXX, What given cash expect level profits a to this and last implemented helpful. you your have That's and you. during up excess buyback did what you share? around price thought can what time is would to you cash repurchase or and Thank flows share

Anthony Ambrose

Sure.

those you new, or back of the has a might who For relatively years. buybacks of be nine going company history eight

the year have just where cash conservative or you being as effectively, a if we with cyclical of bit I to normal sure but of the a cash end board. we buffer. decade. other that And up with run think helped get a quite we'll what discussion last cash, across need to There is think excess we number But a cash the $X we COVID. exceeding some back that's million believe but during the a little consider may past a generate, cycle cash, we date business, the where obviously little in surplus In sure not a to we just to with factors a bit total are safety over business not cash. what have that's us bought you with I'm out profits on resides. point the I'm

Unidentified Participant

in since business run better period? prolong had to you're as would running to when or out is a opposed there Okay. you Is learned how that time that your And different you back the at from you perform positions XXXX then? what anything that growth now,

Anthony Ambrose

a question. good That's

our the did here of in also and also one we in service things that and the have Shanghai think I manufacturing operational XXXX, office, well really and now we're in well teams, demonstrated. right Redmond that's doing having excellence our

One of to think us leverage we the procedure do a remotely, shortages, I our multiple more standard more much will and operating semiconductor learned, in COVID how in the things had I little which in company. to learned the we operate with give guess, functions

go our revenue I than to pulling perhaps revenue out much. think is As our tools more that Joel, mentioned, of XX% investing forward, about community revenue traveling and XXXX now IT back, interesting me CapEx. profile XX% infrastructure was was investment help comparing most more here, from be in recurring and But of on then. think in geared I We'll much the revenue now the towards back we to as but recurring thing be we I XXXX, [ph] it enable had don't for travel. the we'll the and flexibility as

Joel Hatlen

That's correct.

Anthony Ambrose

and And, XX% right CapEx. XX% now, we're about revenue recurring

So recurring helpful profile earnings business bit be us the the that'll larger gives a revenue and we through go as volatile little less cycle.

Joel Hatlen

and chain with our is, both resilience some demand us of for so flexibility add Shanghai of so where ability in Redmond our gives supply we've that that factory, it having we with our to helps some equipment strengthened to local is, helps I'd manage extra both operations have and manufacturing thing our sources factories. factory the probably our it tariffs, the for One that us produce us

Unidentified Participant

helpful. Thanks Back Great. does a market last XXXX, then as security and the were you now platform the since funding time? evolved that you SentriX were how it? when to or receptive in and compared as That's solution, of is And question. this in funding need more startup, initially one provisioning seem

Anthony Ambrose

programming and is opportunities it field great tools, for channel applications experience to That SentriX OEMs the within business where and opportunity SentriX to the complicated, use existing This told we centers didn't upgrades about great of so in only base mind, think systems outside question, product now. PSV learn we I develop scale. changing it we Jeff, expanded and early our we large overall and artificial successfully for it or the in simplified the in really too customers we intelligence we've SentriX we customer easy that And we've appropriate us on. to and easier kept now installed We where programming one simplified our big as a the capability. goals a that's EMF company's current general, the an two engage shows make will generation important major and simplified make leverage market, Well, us fit. of as in - we and the the base that allow second more help additional suppliers it grow to our and be product gives and with us with the also will it's demonstrated simplify installed game and we're system, saw early us, In customers upgrade two future. the that that supporting can PSV winning was did deal product learned that and equipment. a can center We that the

Unidentified Participant

is our that this And all questions at time. Thanks.

Anthony Ambrose

Jeff. you, Thank

Operator

with Partners. from The ahead. Orin AIGH go is next Investment question Hirschman Please

Orin Hirschman

I finally, you? that are recurring point get mentioned in wanted was still you be turning more to thing, mentioned actually focused part just it's to tiny. to really the first mentioned the traction. feel, SentriX actually time, your It's noticed you you us tiny is So is you this because And notable. recording also on of how beginning That begin so - we're recurring never really Hi, on? it and as mean, SentriX, to becoming

Anthony Ambrose

sell back from think a recurring that we've the so had to able and simplicity. We're work them a it's us, SentriX where had Hi, quickly. directly in very than it's demanding customer, the I with actually model that engage understood specific benefits model Orin. the just and to to intelligence historic and able as because customer, again, the we tailoring for better revenue, name. a your product don't their to needs use question on get them rather artificial we they emitted with very, exactly on unique with the to an first very were win it big space, of their If SentriX us we was their with license off But to we're a have very create they able to for meet end But And system permission a to well. other work pay-per-use them customers application. end

So I ahead. Go think, it opened our eyes to applications.

Orin Hirschman

Sorry, your of finish idea thoughts.

Anthony Ambrose

question you clarification there? have additional did or Orin, an

Orin Hirschman

mean apologize, just a Well, this again, I does yeah, paying - going they're that idea to didn't the customer? particular that recurring, be up I to want throw not but

Anthony Ambrose

There's a it's element more than licensing it but a model. pay-per-use to recurring a around

Orin Hirschman

that Okay. of of the Is that size they want to? the because magnitude

Anthony Ambrose

customer worked able to basically don't upon details something that were that's get to and insisted too I to for we many come into of what us. want but the both

Orin Hirschman

in going type it basic what and to for specifically about you this just the of facing what competition And back customer. of terms was SentriX that want, Okay. question, were we

Anthony Ambrose

product it's end access SentriX, little even able component, secure the the line own to on the pre-programming it sure threat it's do have can operation, when a we you're security you as you until they manufactured and semiconductor can much you if do you SMT the factory, is, it way secured, the the an we a on inject everything SentriX of on information supply to the have it always the through method where placement the can more challenges put compete is chain; with concern business. house, end with the line are, People you want And number In broadest back at at Less completely line. a lower points to the terms, code. is the do a of it surface as compete of a benefits because prior in bit with waiting to possible fully secure, end manufacturing assembly of have and we data more than you before different chip The you a semiconductor at a it's do is test when can technology, till make data but don't larger done have if volumes wait to at to and customers much access tend SMT can the have anyone is process. with have else their you some line.

great case, particular concerned. their this for intellectual in was we very their flexible solution, meet over had the needs to have all property it think product so the all own a benefits control and so their needs to we a tailor within could win factory, met were, it And I their

Orin Hirschman

is itself to that in it factory, same. could semi semi plays, Okay. play the manufacturing Again, in also in only itself, just pre-programming reiterate, they're the really one you and where the factory post in the of are terms SentriX or SMT before

Anthony Ambrose

the Over time, I/O that pre-programming side. we always always pre-programming SentriX than that. the also right technology our technology have SentriX supports that on we've for model PSV the technology SentriX as management the evolve from think capabilities now, - on The security data has of I side data been it's possible engine. substantially does, But could the SentriX programming outside technology, and Data are the perspective broader a a

Orin Hirschman

and because this in open win? see you, bigger win Have you this seen pipe a other Is you? see do for this [indiscernible], you besides just even begin obviously win, se, per do what's big is been you win, time this a to for on long a at deal not all for SentriX coming SentriX - pipeline of but it's the break going

Anthony Ambrose

the of the last stronger the Yeah, half was been than year. in pipeline year it first much has

getting they're actually smaller but held the just little of the been - interested some for think a they've supply customers, simply bit they've chain, back by I parts.

the when I it's a So But supply the to product SentriX is potential there. for is we get I think some it's out with in new use, loose, momentum positive this that'll interest yeah, a customers. hopefully be of better, more net our think the actually Again, straightforward overall win. and breaks of little easier chain

Orin Hirschman

obviously to the pretty shifting distance continued? bookings Okay. remarks. some momentum the the illusion Has the minute, And You base like amazing. were for a in bookings just made that prepared

Anthony Ambrose

Yeah, into the QX Xst momentum, on to people get bookings be just would a think much from pretty QX tear We I a I of think challenge. a through QX one back-end saw the like March modeled things quarter. you and the that exactly entire forecast. our and anyway, have more second tends to loaded historically be is where that's like it vacations

is than the were So I I think we beast different QX. excited we've and prospects QX a got but a always good QX think funnel for about

Orin Hirschman

Okay. Great. Thank you.

Operator

Kanen Please is Kanen with The from go question Management. next ahead. Wealth Dave

Dave Kanen

Nice guys. Hi, Congratulations. progress.

Anthony Ambrose

Thank you, Dave.

Dave Kanen

upgrade, installed brief. of percent So, to been that? keep you base, if think could SentriX have is first PSV of “high candidate” question, them answered, actually quantify What going so it a some for I'm you do likelihood your

Anthony Ambrose

fraction we say or so all would about of of XXX north and the globally of that business of now programming right center fraction half the family probably business. or PSV another. a So at business also number have by And looking EMS arrive a I and of upgrade systems automotive candidates our at I and point those deployed at for one are SentriX

Dave Kanen

Okay.

a ASP in-house could what sale profile if then And XXX, you then [ph]. margin if the SentriX SentriX? versus new the So is traditional just And split I PSV? about like on of speak to

Anthony Ambrose

competitive second your for selling very on And call. SentriX the well. Yeah, Dave, lot like the competitors a price all on question. have then this the we haven't them wish sorry, disclosed to average - because reasons, on we I'd of

Dave Kanen

margin The profile it. on

Anthony Ambrose

margin Sorry, profile.

Dave Kanen

better? it Is

Anthony Ambrose

the little assume than on margin profile is bit the a that Yeah, the you business. SentriX business should better base

Dave Kanen

Okay, points. XX like

Anthony Ambrose

go better now. for a little just We'll it is as bit

Dave Kanen

by that so, could expand of much? And into get bit a the you through little guys doors how run addressable into Okay. total if you gotten does have exercise wouldn't have if share SentriX and ordinarily, that? he you your it then Does on market

Anthony Ambrose

Sure.

that expanded memory I able secure has program it devices elements TAM devices. to of before, secure think there's we're category weren't a like able microcontrollers. we increasingly, clearly because and And our new emerging security, just to secure program

Now, starting the without market to we talked a memory see before there in TAM interesting microcontroller things to go to the as, they're years, see interesting see a with that's I've think, going where forward. as memories moving expansion. security. think so I security. verticals what market will volume And you're do whole on a in come the embrace as play we and also that to trying very be indicated be We XX about that, we - there'll call high lot we out opportunities business suppliers some We're of there's secure don't

now. I become So oriented evolves, expansion will as much there's market more the of the then And the TAM market think shape an immediate time. security over

Dave Kanen

Okay.

SentriX? has it just incremental expansion, small. So SentriX? with expansion core I a guesstimate mean, a could Is you to traditionally, would what XX%, with the been take if How relatively the quantify XX% your opportunity market is you as

Anthony Ambrose

Dave, and I'll what, investors the you with know of on on rest the than the rather hip this one. shoot follow You that one, up from

Dave Kanen

I shipped to hear you expect did terms $X then, QX? be majority And of that did Okay. million, in of backlog during say like Joel the that correctly, the

Anthony Ambrose

correct. That's

Dave Kanen

when possible QX, I chunk good it July so flip flipped, summer, as people switch know all kind pace then, how understand will? I is shut I and typically gets your a holiday. - orders come speak you mean, does so the of forth. a QX, And on the goes back, typical down of pace to quote everyone business, I - the see up it's But does follow experience From when and - things like it of the into order through you not in in the Okay. vacations could when if with in a sudden of Europe mean, pick

Anthony Ambrose

should and say, And in typically half quarter like out is more last years and regard. to comes tend Most in and business, that years our a of in that Well, I sense month I business - QX nearly you think exaggerated over of quarter last make quarters to in I think the quarters. you the of be and tend anyway, when QX average the it QX lot our the QX the month.

Dave Kanen

and right. Okay. Thank in you. I'll luck Congratulations and quarter. All good next tune

Anthony Ambrose

Dave. Thanks,

Operator

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

Anthony Ambrose

you Since thank and the call there conclude further joining time much. for to everyone like very at this questions, I'd are no us. thank Operator,

Operator

for conference concluded. Thank you attending The presentation. now is today's

disconnect. You may now

Data I/O (DAIO) 1 Aug 212021 Q2 Earnings call transcript