Earnings call transcript Q2 2023

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Operator

Good afternoon and welcome to the Data I/O Second Quarter 2023 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Jordan Darrow, Investor Relations. Please go ahead sir.

Jordan Darrow

welcome Results Data Conference and Quarter Corporation's operator, Financial XXXX Call. you, to I/O the Second Thank With me and today President Anthony as Ambrose, are as of the company’s Joel well Chief President Finance. Hatlen, Operating Ng, Officer Gerry Chief Officer and Financial Vice and CEO,

tax construed and this from events chip any Before begin, expressed of operations, or industry other differ product estimated markets, as involve uncertainties statements conditions, a such statements, silicon may in financial supply by forward-looking implied reform, to concerning chain factors, COVID-XX, impact that of statements remind that position, known other we or to call may cause you performance future shortages, other from unknown results releases, expectations, risks, like be and materially future partnerships those made I'd regulatory which conference and statements. and revenues, prediction are which results economic actual new

including the and of I/O statements of these products, and on other be from relied risks, the among XX-K overall, new impact should based described company's the of changes forward-looking company and The level chains activity continued Data forward-looking timing customer duty conditions of semiconductor reopening the the These on Securities installations, including market factors accuracy and and communications. Exchange any other other in XX-Q orders any the activities supply to Forms with with upon. trade along of acceptance and include efforts level pricing economic COVID-XX, update and filings for statements. Ukraine, restrictions, Commission, with time Russian our and related and time no not unduly part uncertainties competitors press outbreaks ability and market the base, to revenues of automotive industry and under demand, international including record deliveries product to is in and as by from releases China, war in the the global the shortages, relevant within to recovery those XXXX completeness

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

Anthony Ambrose

Thank Operational Quarter then begin the Joel I’ll and remarks I’ll XXXX and call numbers. you more Financial Jordan. our my Hatlen by addressing performance Second over detailed turn our a very much, look at for to formal

company. Joel driving disclosed plus after Joel smooth on we the With Ng, with is become is be for XX who reporting will in starting after of us previously XX years cycle. second our on an as the end Effective the he succeeding the advisory August, as call quarter first company Finance capacity who the today Gerry earnings July, today’s XXXX joined Hatlen, Vice a reporting President time including the X. retiring cycle CFO quarter second our and will Until handling transition that full time of

in up note, On and company has role defining his his are future personal setting thank who I of its would acknowledge course. and Joel on unparalleled a shareholders to professionalism, like played a to and the many for expertise He our today and service character. we year us pivotal to

retirement. Our regard of wishing highest the behalf hold everyone staff, and on well we’ll him partners customers, and him shareholders be in in

you moving yourself? for Gerry we look As our Gerry to would running, the forward incoming that really like and forward. CFO, With introduce ground to he contributions has Ng, hit his

Gerald Ng

operational a comprehensive all seamless and speaking look management in of future. plan assure continued is tone growth am I for to and the pleased Anthony the success. be and you, Data team to Thank the introduction. to we has team been with the to you finance forward testament believe a a I by transition. supportive, company’s The very tremendously I/O joining which contributing set I have to

will With that, back pass Anthony. to it I

Anthony Ambrose

Thanks very much, Gerry.

take let’s look our Now, at here. numbers a

maintained which outlook The first the strong was momentum builds growth Internet from we Similarly quarter. quarter our automation automotive, very of that the long-term Things. catalysts benefits and in our on industrial second from secular

our were platform to continue production IOT increasing levels and or where see we continue. security QX for start into I’ll in customers revenues. recurring strong increasing going demands strong as SentriX with devices are production as Numbers enabled

in on our a got also We quarter. repeat the order SentriX platform

increased is benefitting We’re security. This sector. driven market automation in advancements also solid robotics, being the industrial and from tractor demand by demand for

at see majority fully automotive growth automotive we’re benefitting a generate for electronics, where the in electronics. continuing which we strength demand This is is the from and our also clear long-term semiconductor We of growth The the to it's market revenues year, compounded opportunity about decade. triples growth the of end growth size midpoint that of of through where analysts least that market. a XX% our rate annual forecast XX% XX% at this

will On secured in to opportunities everything grows top of SentriX’s need be believe this us for we as creating markets. both IOT

of about dollar every XX% bottom the or leverage operating line strong delivers model to business revenue. Our for

markets leader the the For and at wins investments our to through customer strengthen in position we’re our serve definitive continue and products. we new the top

industry. of in the least electronic a is for on customers last benefiting include global new a excellent OEM new new in QX strong of the were the from We years. brings now second XX% at growing $X.X the added XQ alone. quarter two number each about million half Witnessing first quarter top look vehicles. customers year. key We're some Bookings improved XX chain by demand, take to from the first XX% from and an This which results. leader Let’s customers products our of and the five very for contributing quarter us second the last to automotive of XX in supply

past supply down to the quarter. QX quarters for when the chain we the recovery one were and in related comparison shows ago the for China from locked performance COVID challenges financial year is four progressive much Our easy in years. an prior of

adjustment last of million to from we’re and gross $Xmillion substantially of bookings You'll $X.X recall margin. up revenue, in QX year-over-year in that shift this revenue to QX that we including Even estimated about between year.

in semiconductor we're effects first we're our second-half strong the North in better to to has Regionally, important call. slow as expecting and results continuing in China there. demand America saw that the unit strength. for I/O and Data EMEA, quarter automotive to we half see driven also growth. in electronics products It's indicated strength reshoring first is America, and for reiterate term associated been in is in secular by growth content North for complements contributing primarily growth said services the to semiconductor strong vehicle the autos and vehicle this, long per the our in consumption Having momentum

and within Ford overall heard We've sources interesting automotive the Third demand party from strong silicon results confirm strong market. demand today. OEM automotive

car We Street digit consumption published I/O are combined it couple been per of this car during Journal an weeks secular encouraging the of by the report also saw interesting has a where double industry. electronics half that the sales new ago forecasts. estimated as up XX% the growth and growth sales automotive first year, are Wall exceeding business, Strong a complimenting in environment very of creates our XX% in Data for silicon unit industry over

strong provider our and in by Teradyne, world, America In Micro reported supply silicon to industrial reported in a sales GM strong OEMs was many at quarter. up XX% markets. EV chain. said And addition highlighting doubled car including automotive demand all again equipment growth. strong North more electric Toyota In the in Ford, battery was key automotive QX X%. Mercedes QX its the results. reported other players improved yesterday growth unit these test SD than looking in companies QX. reported strong their up automotive semiconductor an nearly sales customers to results, of driven

While demand consumer as the portfolios. to the regulatory are added is daily attention based by us on their markets we're sentiment, automotive and stimulus EV significant to and Higher strong, there catalysts models manufacturers automotive growth paying all. for industrial new are being particular almost developments

also includes change we're in speak, In so it early addition and fundamental the We're more a structure days software automotive under to within the hood, compute in changes defined domains the to to vehicle automotive market. the electronics fewer some seeing seeing electronics. of power EV,

require gold the opportunity business to this greater programming and continue a expand great changes with greater us to as of at speeds gives area, This data. these programming programming the standard demand amounts the architecture for vehicle growth auto smart with leader in all. is all code the of opportunity for as flash us in our increased to industry. domain Data exciting an address this And I/O and is controllers

over turn detailed With numbers. that, it more the a at to Joel I'll Hatlen for look

Joel Hatlen

with move balance the to Thank then income to statement. and and sheet good Anthony I'll everyone. you, start day the

second quarter However, for review the the Gerry for today specific stage interest our for and we'll quarter, commentary set of release and of the focus in comprehensive review third the my earnings on allow you to to points press financials. in

DSO, elevated June, risks, Days range. inventory outstanding longer financial same $XXX,XXX is the with better in at during on at our XXXX to reduce cash This been days the collection both were see on of of had so million operations while up $XX.X March from $XX I/O’s same capital are as from XXXX. no first forward XX the or we than inventory $XX.X going approximately inventory quarter a of the in declined address working quarter strong and remained Data XXst. levels the shortage sales potential we as in December condition million exposure, Receivables was XXXX. measure XX receivables managing to million still XXst. Cash end and second target

mentioned, Anthony quarter two for our As at and bookings years. the were highest level quite quarter in were strong the

first of For up bookings million million, the XXXX. in of the first half from were $XX.X XXXX, $XX.X half

up March, of XXXX was Our of $X.X XXXX. from backlog million, on XX on $X.X June, million XX

of we scheduled the delivery release, is than As QX noted larger typical. is share in backlog a for have the

continues XX% basis, compared to automotive of XXXX. comparison, from XX.X% sales bookings of to our of orders geographic second XXXX derived a the XX.X% second XXXX. of our addressable year-to-date revenue electronic On for sector bookings Automotive quarter approximately XX% were during market, the and the for year of the primary represented for quarter represented international be

margins were in in part sales relatively in fixed of our mix XXXX, less volumes Product XX.X% margins favorable deferred including variances. from previously of Gross offset second on quarter by up by a mix, rental a credit channel the higher second income the at costs. and of quarter recognition purchasing XX.X% XXXX as factory with improved

in a stronger second of being from and higher sales. for we margin our the as a For where of can XXXX mix, sales channel parts show our of gross direct we operating quarter in of selling the commissions and level percentage Americas expenses, Europe account with

of were SG&A R&D the Some as on compared our $XX,XXX of in expense in compared additional due expenses mix higher discussed encourage had These one earlier. $XXX,XXX IT project outside about relating our of as other of about well into time hiring play forfeitures. include quarter in to our SG&A. estimates as compensation original spending run expenses to additional and $XX,XXX of We product We rate. we a a as higher non-cash had impacted to support first sales direct additional resulting Selling stock services second to grant in quarter lines. which a expenses factors came annual quarter prior in based of spend for $XX,XXX as support

of by to which subsidiaries of the to factors was quarter quarter in XXXX our which $XXX,XXX significant first to tax to interest $XX,XXX foreign none quarter quarter due balances. quarter $XXX,XXX compared of tax U.S. cash that compared Income income invested in corporate higher quarter second our loss. in XXXX, compensation the period's NOLs shielded our interest resulted income Incentive second to XXXX second net rates Other of relative due and expense versus second applied quarter $XX,XXX were XXXX. up $XX,XXX to the of in period higher the the second the was in on are second not the profits

it. in as dollar a loss in dollar strengthening a on ran Currency an the $XX,XXX first quarter the of U.S. of eye little Expenses in the gains XXXX quarter compared of of second XXXX the in and hotter quarter have and following based about $XXX,XXX the of U.S. on quarter a XXXX. second on with we $XXX,XXX second

XXXX, quarter of NOL's differential $XXX,XXX. Overall, financially XXth earnings first of the year-over-year in and earnings EBITDA had so no remain EBITDA we EBITDA of to strong $XX,XXX the $XXX,XXX the compares the stood X,XX,XXX No second XXXX outstanding June, very million. of XXXX in $XXX,XXX June in of shares of and XXXX. We negative with Adjusted over of second adjusted was at quarter adjusted XXXX XXth on have debt. continue $XX of on over quarter

expected digit double remarks, are continue level plan in a Looking his expected be XXs our with year impact sales throughout activity along modestly changes. sales mid we forward growth second catalysts, for Anthony the discussed are the to and fundamental Operating some the of elevated as with inputs high expenses the Gross funnel of of margins revenue in for in quarter to be to continue incentive to of now XXXX. given from the year. the high and range higher compensation growth commissions, in currency to

remarks and but to up concludes second the call on me great That very my we've to comment am like quarter the my and the XXXX, forward for I'd before will go confident I'm questions, open team we to retirement. appointed Gerry Ng of that he replace for happy that I success.

the XX people I that and forward time passion with look must Data enjoyed team past the the for to the spending more by family, years. truly I While shared say I I/O

in phone create thank electronics wish the for with we you the you, and the alike. security and shareholders community. the IOT of well. including XXXXs all the for recently as and customers more you, We both you first absolutely endeavor I early challenging all our and been industry and of members am the into miss the to and grateful I programming, mobile markets. It's automotive of changed rewarding the face will value experiences and for future

said, you operator, Q&A start that process? please With the will

Operator

Instructions] now momentarily session. our At answer We [Operator begin roster. time, pause and will we'll to question the this assemble

come Capital. from with will question Garrigan first Our Kevin WestPark

may go ahead. You now

Kevin Garrigan

for the retirement congrats the I/O all good strong and best on afternoon the on Congrats hi, the joining results. Yes, Joel. guys. team on Gerry, Data

Joel Hatlen

Thank you.

Kevin Garrigan

absolutely. Yes,

XX us off, I you give think noted any start wins, does Can had past kind the customer to of the number new that today of about SentriX had five that Just customers? Anthony, customers. include sense SentriX you in a new that and

Anthony Ambrose

comments. Yes, for Kevin, much thanks very the

it. some we that in actually that sharply. seeing I on I there's also we're repeat to And quarter the that so earlier that partners our to order pretty mentioned got are up through On SentriX, units the our fact focused the the add of

So sure those sort comment, referring expenses. double I just about it comments. quarter. for the to want the talked just margins digit growth of are We and SentriX want to with he's the was encouraging to comments. on those things make also I clarify Joe's full the year and to clear

Kevin Garrigan

as a before OEM engaged with got customer would got makes it. you how guys it, a were become Okay, actually the customer, vehicle That that sense. and to long then decided And you was you want what customer kind they global draw? that say of the

Anthony Ambrose

been a ability the the the for global from through Tier We're programming understand automotive. into systems automotive chain only and we've resilient high supply engaged industry that to the with the the OEM not needs leader continents the automotive. of but think win in quality we systems, the Well, going won around EMS We that world. five the is deploy the companies with to time those we Xs, to them with some reason I referred business the business quite reason customer we with

ability systems, components chain new it's service issue respond automotive systems, to have to any of lingers to issue that any supply because the the an ability of add if those to kind to ability for there's costly very the time. length The for

permission know to So don't automotive able name, have use XX who Tier the would the are this reason of OEM. the Xs add but XX have through we our same reasons were you to of we We top are their customers. list certainly why they

Kevin Garrigan

yes. Okay,

Gerry in and hop Now, One the again back on joining I that the then queue sense. makes Gerry can, and if total for team. congratulations I'll

that to the I/O? Data were or three two you Just things attracted what top

Gerald Ng

you. thank Yes,

in to it market I/O automotive the the this join with foremost, particular Data as contribute and the easy is growth decision potential of Anthony me and an continue team the and growth industry and was high industry leader First excellence. operational indicated, for its to to

Operator

will Marsh Our Singular David Research. from next question come with

You may ahead. now go

David Marsh

welcome previous congratulations on echo callers' the comments, and guys, Gerry to congratulations. Hi Joel, quarter just and the

Gerald Ng

Thank you.

Joel Hatlen

David. Thanks,

David Marsh

slower to you of about like kind nature much first remarks your numbers a press kind it of it of revenue wanted you're pick slow and pick the kind But sounds terms as in release some that the recovery. expectations put in to percentage little been in anything and demand expecting up that or would start, that up prepared around China some there. help talking of second-half? how perhaps of us commentary over then being to -- more as well the half for understand maybe a exactly just it has second-half like I there's just are and first how bit the for color of in the Could half your So just your Anthony,

Anthony Ambrose

probably want you is a what but I There's into snap it'll the number Sure. on QX go heard other probably sort going of of snap know, an from saw think the be we of was Don't haven't you it I won't back. really- you then tough detail and level David, companies. back. sort of seen expectation what okay to call,

expect- is expect than Now, as that, know measured opposed of steady better I think and QX you shaped having QX but than QX, be V it recovery. will said to we be a we to QX, better sort more

vehicles is world's sales, vehicle It's three about largest so for China China. like Having every automotive world's market think said largest getting of out electric sold the five market. electric in that, the

the on use an it's look just all could So standpoint, over think when happen all for analogy contributor if time. firing cylinders, which that numbers will like you huge China's our can we expect of a car, and what on from EV

David Marsh

that in I question very other that's in up we subtle year, start thinking change where you I of that's full in certainly, mid And you full the drives that had margin? Should mid in really could knocking had kind the by just appreciate guessing for get upper -- park both year is rest how can't some helpful. first just XXs. the and to quarters. half gross I I comment in of the could hoping now maybe a the look fact that the XXs that your the margins previously been around gross guidance was -- XXs that driven give for Yes towards the on I the guiding the what somewhat the XX% direction year mix. little of bit then out upper us that granular. you I'm pretty too first and half noticed clarity like above could it

Anthony Ambrose

that Yes, saw little customers I and channels the year we XXs have both and gross that better have for margin, has that's of in long. But parts been been mix that benefited it's think where relatively basically bit to of a situations and directly having margins. David, discussed our By we to distributor mid discounts. from of a favorable number contribute more instead guidance how America's I all the operating year we of stayed this really a Europe upper for sell selling commissions expenses gross what

We a a really comparison. from and say a into particular pure margin lease fixed the purchase I'd sales was as in factory sales the piece the just deferred a revenue where that's were quarter benefit we another So relative to ago, had mix during really, volume volume helped some costs product to benefit. option year opposed recognized that last that

Operator

Winthrop next Our with Matt Equitable. from come will question

go now may You ahead.

Matthew Winthrop

you, Anthony? Hello, how are

Anthony Ambrose

you. Thank Matt. Great,

Matthew Winthrop

the I/O I -- a curious you to listening a new sales? to introduction has sales regarding a is introduces new when just marketplace it more is vehicle, a or to favorable line of the has recent output comments. volume Ford a marketplace, than or automotive vehicle Tesla new vehicle? volume release car to new a new Data Fantastic. electric in your more on more was and

Anthony Ambrose

question model has The good the model, me a way. more year's more than That's silicon it year introduced let that answer really model. have a it you in factor is which this going year prior overriding in than it to and this last silicon that is

programming. companies will auto their in total it, time is every and car refresh more have that mean silicon the So there's to line. product more going Okay? for demand The

the numbers our So, is semiconductor A OEM's more and a really inside companies for XX get Xs know target top I electronics of be of earlier forward growth. we're on XX% their this more growth to well the the EMS going And they the XX silicon own fundamental automotive of their year growth as XX% published. positioned that's industry, on long-term We're business. it companies that's you increasingly silicon. McKinsey has mentioned in some for on secular the the automotive automotive Tier lot focused the extremely focusing going have driver that the with to published, of

more model every there more that new There's more So replacing and piece silicon we and car the and and more a the model likely. stuff, it's simple. going there's there's programming, of really into silicon out another get model that just has a month most that's

Matthew Winthrop

all, to you anything at is or That's why I that's that, you you I to didn't going up because going going thing is in this. about you that can what's Is I this mention color question. that your back in indirectly the a add and and of there on benefit guys I'm, sort all on anything know a of didn't I that mention in AI remarks talked good have directly? asked prepared there you noticed you SentriX but the world there. connection regarding

Anthony Ambrose

data that cannot use the the to Sure. have to probably call. to we the well to with. if base have this tampered have order in -- calls, mention I do in job only understood basically quarter the AI learning and the said think we and that AI environments get you person is play structures you in known whole to with in world way didn't But in earnings a have algorithms train a their last developed the AI especially the good to and solid have with be I'm have machine be I training and be that might on prior you, AI

is that than comes that security factors. more important in with other of element in an AI even there's So

to protected the We AI the and secure on SentriX are in that in the their using space customers that coming only to make machines. sure streams they're had of systems, not data own that out have algorithms, but

So world aware more become acutely security. and think more does more I they're of going as the AI, to

and if Because AI catastrophic. data, in a you bad regular you have it coming world, garbage machine have an data could out in you world, if it's bad garbage train in, improperly, be the and

Operator

[Operator Instructions] from will question Our Private next come a Lukowski, Chris Investor.

You go ahead. may now

Chris Lukowski

Hello, congratulations on great results.

Anthony Ambrose

you. Thank

Chris Lukowski

about I even to seems are you doing know the of though It quite sort that economy being want Chinese ask sales a China. is electric well car to publicized the well. slow-down,

they programming kind how Are legacy So programmers? of cars? using are they those like older

Anthony Ambrose

presence Well, think have industry a automotive we and cases in China the seen in I in China what through some in OEM's. we've is Xs Tier tremendous

penetration China happy So, that market participate think in continues and the I it. our we're that with to in think -- grow we'll pretty we as

emission specifically not in wanted older I some to them into standards quarter dealers of off in. had models, emission lots think you'll they were would and standards process, new shifting cars recall some manufacturing we July that the that in on we in came the sell some new of coming some be there impact the effect said able last going was their once think because to there get

Chris Lukowski

Okay.

expect and China they're maybe All probably much. new improve do just the the near So not as future? you right to in selling models

Anthony Ambrose

half. have will China Yes, believe we first be in -- the than the we better second-half

Chris Lukowski

words, they want cars memory gets memory would yourselves number overall help store in you? whether view in I as on to complex it, need mostly that or the general, in chips software more And in of dependent cars? and of more you cars cards to gigabytes the flash ask In right. All other

Anthony Ambrose

there We've of overall be you've the number We've in hit EMMC refer up, see XX, talked technologies are bits content. When we that Infotainment seeing markets point I of the but size I gigabytes Yes, refer also play to probably the XX can easily in, increase I Chris, electronics. as on semiconductor probably in That's seen a you're that programmed. one. data total say value, biggest usually of the has to -- now obvious the we more bits I there. from UFS. more the to and only an goes transition to think there not about and automotive good XX, that dollar could a seen

You'll continue to in demand, and to defined software But still cars. architectures add see more or as architectures. elements microcontroller more especially of companies this active big especially there's a controller memory safety chips, domain lot

a it's increased well systems, total additional as both, security. more So combination footprint, of memory more as bits,

Operator

would remarks. no questions. further closing are conference There turn to for question-and-answer our This to management back session. any concludes I the over like

Anthony Ambrose

everyone is closed. very to you With And the Gerry. much, thank aboard, Joel like Well, operator. I'd thank welcome for joining that, call and thank call you, today. again, this now

Operator

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

may You disconnect. now

Data I/O (DAIO) 27 Jul 232023 Q2 Earnings call transcript