DAIO - Earnings call 4 2023 | Data I/O Corporation

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Operator

Good afternoon, and welcome to the Data I/O Fourth Quarter 2023 Financial Results Conference Call.

[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.

Jordan Darrow

welcome Results Data Conference and Quarter Corporation operator, Financial XXXX Call. you, to I/O the Fourth Thank

With me today Anthony Ambrose, are the company's Chief Officer, President Financial Gerry Ng. and and CEO,

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

These statements and global ability revenues Ambrose CEO unduly Data now for any level and impact would over I under to those industry new in and described factors communications. geopolitical installations, be the other not turn other and part by Forms including based order XX-K to relied company of and these pricing completeness semiconductor events, President from of conditions The and Securities uncertainties filings economic duty should include of company's Commission, accuracy time Data time levels the upon. and like releases forward-looking market product press and market of regulations and shortages, activity I/O record statements. and the automotive to And the and is competitors on deliveries Anthony forward-looking trade on of the XX-Q Exchange changes as with the and the no I/O. update to international to to call in of other products, risks, acceptance activities the timing on overall, demand,

Anthony Ambrose

for operational in financial addressing you and my very performance, welcome, the Jordan, profitability. performance by I XXXX at in and to will return XXXX to remarks look I'll very Gerry delivered growth call more turn We a thank XX% with a our the and our formal detailed and over begin a CFO, Well, revenue financial numbers. strong then much, everyone. Ng,

momentum XX XX% We experienced XX%. over of of we third marks quick across had carried and bookings business XXXX, shows this wins XXXX, XX and all a that in encouraging top grew automotive We over year customer was which our that new in into our is new segments, market customers. also with over summary XXXX. in our and over represented The XXXX line row A worldwide

were And locations in globally many of year. during those the automotive marquee wins

software has for in is year platform year. were platform nearly provisioning our for grew PSV margin guidance XX%, in XXX in XXX% gross programming revenue deployments Gross and for in XXXX Centrix, industry, pay-per-use over with Our versus XXXX. to XXs most the upper the on deployment our platform mid- successful the secure now margins worldwide. and line the

for the nearly spending COVID unwound profitability, reflecting grew strategies. and $XXX,XXX year, chain cash our declined supply Inventories controls. And we about operating as reductions inventory era $XXX,XXX

and our to XXXX from strong earlier. was EBITDA point mentioned for as up over year, million I we with interesting profits delivered prior to $X increasing Finally, adjusted $X.X operating the leverage, the year, an positive, income year. increased million was net

platform. Japan, with year growth products in IoT separate partnership generation well first positive our well to as provisioning In with collaboration with we of first with launched a Japan, microcontroller as security Americas had for no excellent formed a the we the of the as very of year new proved in reach the our we're the Asian China. outside latest region support company region global leading part centric to technology SentriX in pleased Nuviton establish their as service Our as

As mentioned as that XXXX. of And earlier production. was XXX% revenue I earlier, customers multiple the the one year. pay-per-use well SentriX as into our mentioned in and tapped solar And into in coming software new grew overall markets we

AI for very ask continue couple does ways. markets, of days good I/O especially in impact business while plays to news top reasons, is these people AI our Today, into Data AI how and of us a

is hardware-based AI First, learning, learning the and to strong that other training that their ensure data accurate trust for platforms need software routes machine and secured. of are sets

we This have the card securing AI is cloud. an talked the about case customer accelerator of with a for use ours. hyper

see become play more we more in space autonomous more sophisticated the We cases automotive and into as also applications use centralized. and AI driving as other see coming electronics automotive

of In XXXX, discipline and focus we XXXX. call that our to disciplined on the programming the focus markets, center in worldwide, be what that and addition automotive, continue We'll industrial second adding has we'll spending the half will be markets in growth. and to in to brought target these Gerry

foundational For our us moving is XX% of for growth, at electronics business automotive forward.

Assist multiple multiple As we increase and include said safety, security. calls, continuously. in on Advanced we have active or infotainment, These driving in-vehicle applications Systems, Driver content -- semiconductor connectivity the times electrification

grow customers strong And We have XX though top come ask in the automotive, XX entrants we continue even new see growth people we market. as into automotive, Well, are us, how new you continue win in can supplier continue of the if to worldwide. a to dominant customers? to you

existing their to and expand We continue technologies memory win new current mentioned in new worldwide. customers all as to of win UFS expand that And continue customers with factories flash new applications new use earlier. we sites as I

in at is sales into going years. added momentum but the opportunities for year. significant its quarter past only and it automotive, our continued see board, the our funnel we across positive the So is programming in for level industrial automotive has the not several in centers, outlook basis XXXX. highest And in This

is for I/O. Data a asset to continue be people Second big

those past we've us. behind spikes with to Our global the inflation chain navigating did the are supply believe deal closures, largely that team had through over job an We years. and amazing COVID disruptions several

to and team keep to continue add our it. great We

As putting specifically the really financial revenues. our a and recall, leverage our and of CFO asked efficiencies I operating we during Gerry on turbocharge as on you have third Gerry last quarter tighter focus to was here grow company's will he's as improvements line performance stamp may now process Ng appointed the controls, spending year, company. top the

expected XXXX. the I'll environment, our reiterate mid- on growth a margins earnings Based commissions combination stable and with comp growth expenses us double-digit an is control of and in excluding sales currency. strength incentive XXXX consistent bookings top provided XXXX, exciting we year. are for XX% or the expected spending than operating global regarding for in to The what we Operating to to amid be expenses for XXXX moderately in expectations. be line in release in are combination XXXX. lower range operating continued Gross expect high

to interested I to launched requirements. CTO, and and I/O his and Small commentary, Before security to like topic hosted Bard our Cap to and I'd invite it shareholder. month, the other chat AI investors for by Gerry Gulati, where Vishal were Data we Investor I our of last programming listen interview Rajiv recent fireside parties an of over Associates turn Mishra interviews. Late on

at April, interview Research join in Trade Benchmark Williams, an semiconductor opportunities based the invite Analyst, week, growth us talk Annual about Expo a Show, we we'll Also we Company launch David -- you in programming Apex by Senior California. Anaheim, to Next Industry in semiconductor hosted Equity general.

If contact you're Darrow Jordan like as our to in turn With if attend guests. over the area, it to you'd I'll please Ng. that, Gerry

Gerald Ng

up enhance for earnings operational our year update, our my end condition and at full I/O's financial quarter slightly the at second Anthony, on points cash interest to financial at working and profitability, The $XX.X I key look everyone. $XXX,XXX today looking Cash year and fourth having be strong with with million good day I/O XXXX. million QX end capital higher to Data forward from reflects prior you, of results. forward. performance Thank team million of $XX.X full Data from working and comments of had mid-XXXX $XX.X increase operating will increase the year. XXXX to $XXX,XXX My and and of lower inventory the perspective greater and interest earnings. the cash, joined focused the remains levels improved a capabilities in

our no to prior Inventory debt. contributed aftermath, overall disposition as from increase, a strategy and addresses continues now mentioned, efforts. the year. that earlier improved conditions, Anthony at $X.X and have the The market million that to the end-of-life unwound material products reduction COVID initiatives declined $XXX,XXX operational lean have change, company The during chain for supply conditions

a remain top XXXX. in balancing levels inventory priority, demands anticipated customer Optimizing while

QX XXXX. statement. in of third $X.X revenue to quarter into of quarter, decline Moving booking coming Fourth period resulted because income compared the lower $XXX,XXX as to reflects million a the delays the from backlog which at

$X.X However, quarter or recovery fourth revenue with quarter million, a $XXX,XXX strong $X.X quarter. X% the fourth preceding from at increased bookings million, at

from of percentage returned million of as XX up recovery Auto year all X XX, For reflecting of $X.X XX% and to million favorable was of points XX% normalized $X.X comparison start and ago, continued growth Metals has post-lockdown of $XX.X industries, XXXX. bookings at Backlog at electronics million, in at a the the sales more than a to December and IoT XXXX. automotive higher backlog electronics X of million, this XXXX, were strong $XX.X again, level year. past

XXXX and for margin consumable for course, QX favorable recurring the and, new Revenue material systems from XX% of comparable remained systems higher The by full volume, efficiency cost and with of X year Gross both XX% a driven XX%, prior combination periods. was up steady recurring and revenue growth, of points sales revenue percentage mix improvements. at revenue XXXX. improvements were reductions and operational at

increased lower to to tariff, costs. our obsolescence contributed freight, inventory which carrying levels, and example, also contributed For lower cash

$X.X reached to the contributed and the operating of We improvements the improved and in million second $X.X XXXX. high XXXX. critically profitability lower Cost costs and the efficiencies. QX half undertaken expenses efficiency operational to -- operating noncritical of from in third continue of X containment Moving expenses. on spending, declines at million in increase expenses we represented manage quarterly Operating second consecutive quarter review to in quarter

volume which to related generate will operational growth. near-term longer-term capacity we expect discipline, changes, operating costs Excluding maintain strong cost this and to savings sales

operating leverage Interest for position, of as Increase was income investments, Net months $XXX,XXX cash QX income growth due year. for greater profitability $XX,XXX the certificates of compared to nightly from gross deployment X operating loss of also return margin expense for XXXX. into XX% of the improvement such year. XX% and XXX reductions the a improved stronger to for The compares $XXX,XXX and was $X.X point previous the in million sweep revenue to basis and of of short-term rates million, to X which increase to XXXX million profit $XXX,XXX contributed higher full interest $X.X to half net income contributed of added to second increase deposits. accounts cash of $X.X prior year, for the a net a or

again, $X.X Similarly, adjusted EBITDA XXXX, year for million. $X was and of million $XXX,XXX full improvement representing a QX for

Looking expect to of decrease, timing the orders forward subsequent bookings to will which XXXX, revenue as help the year offset of year our full sales compensation-related to we highlighted Anthony be The earlier, and impact volume outlook. basis, increases. second weighted full a may half we more year. expect in and expenses deliveries expense growth, On double-digit operating

of cash financially the higher audit is and year public would filings and annual with the Overall, proxy for concludes Q&A in due you first company including expenses start forward Data no costs. always my look strong we with a the be remarks and I/O process. quarter, in solid similar the to our operating please substantially I and year-end XX-K partner expenses, performance. a case improving Anthony As will debt XXXX. our to and team capabilities continuing financial full quarter remain the fees, position, very That operational to Operator, fourth return profitability. to

Operator

comes first Singular David Research. from with [Operator Marsh question Instructions] The

David Marsh

Or just think it's bookings we guys, from also double-digit growth I I guidance growth ballpark? in to the wanted that the bookings Typically, translate Should the relative revenue ask in your assume First, around too much revenue to that translates for draw reasonably trying that is do quickly. guidance, bookings. to about 'XX to it?

Anthony Ambrose

good really a David, question.

I perspective, sales think into is funnel we're what the with The that they do revenue and opportunities from it the just we translates we certain, get our back-end bookings, is exact see revenue little we turn we bookings when bit have will saying believe growth. gone a into sharply double-digit in more less believe be loaded that sales funnel, when overall. timing a our up of

that's as pretty test We clear we're think hearing across what from well. companies

I think and little bookings bookings. the exactly double-digit want the systems. get would the expectation would And so a less it revenue the depends when grow when you on But they than bit be

David Marsh

like the I'd X-parter. recovery some second in And the And backing off from news about and of my -- the production, China the coming then for very about about guys some you we're past and of With still to talked EVs. China, regard all in of slow a also the hitting in economy hearing not EVs, really have kind we're a growth lot do manufacturers seeing cylinders. headwinds question, EV headlines on being

what's give So kind things you and just in terms table come the just confidence guess? of the a us of what the I and sense tying fact together, what's those light what's growth talk with about booking going of to of decent you X pretty overall just guidance to can fiction, on and those in headwinds market gives

Anthony Ambrose

interesting. it's David,

guys. year the month nervous the sharply pretty pretty they'd they news a is year. backing us last I the on year And up but is this China the New over of course, demand. guys maybe maybe overuse happen which little morning. of always I prices Tesla in Year and also to think it a different BYD them, think was because the cut that maybe read comparisons for a not morning some was turn stimulate leaders. as to metaphor, accept, the Chinese it a for course, and Chinese of I'm this that this morning, because the market, good the part for on I or EV EV I in this of rough should than other great except, business bus for were

wondering and having were be then comparisons January distorted. And it year-over-year would your like from Christmas to shift why December

continuing So automotive ground, buy a China that. see and directly the like but buy systems. We I'm people in consumables China opinion we continuing going to see see form people on things service first-hand and in we'll and to to

there. to tell than we I what business see market there's know So and we our continued what don't from see you the other customers, in

to them. in about leg driving talked see IVI And consume EVs like programming. thing lot that we The the growth that one new lot that platforms or is the lot also other tend they mention automotive. of the the I have want reasons one we five as We've EVs because is a a legs systems driver advanced to a of assist of are a overall lot of new of

assist no But There's there. systems the the need the on infotainment quite features be cut of you of in an don't let's slowdown back EV have talk to advanced been to car those new in active safety. And platforms driver talk our in no there's in opposite. or -- been

we're see centers, to today. which making look And globally at we as our everything and predictions what look automotive funnel, as on our well as the includes you motivated so you funnel, as sales industrial well programming when us at make that's we Again, and like --

Operator

with The next question Capital. comes WestPark from Kevin Garrigan

Kevin Garrigan

results. the on Congrats

up SentriX of picking doubling revenues we to the things as had of the think security early For at seemed you originally it things early of that question, looking were with were are imagined? the market. out now I kind to SentriX, had Anthony, kind my past, kind you process? starting Or the you play noted still are XXXX, in you market IoT in first steam like

Anthony Ambrose

gaining. a in security multiple we're now, B doesn't But buy It's this us market. billion to is times, unit said be the from have think fundamental XX have a happy SentriX I won't taken longer. that And -- $XX we're obviously, a on it. a we and microcontroller fact, traction a it's situation said belief with that's . you lot with the that where the we've before, is that years able we've

customers. And we continue at some new go is so Those new find in new to complete We support to for what of investments platform. and investments made now we've But do the help done customers, level. platform capabilities just still and the SentriX. is understand what benefits largely add to devices make we've them features need a are

to new these customers us. of will Some be

our will come customers these us to that of programming have Some from partners centers.

us be SentriX capability doesn't inflection some but year-over-year known I'm the to not an of have. to they point XXX% customers yet, suck. want already that And will well systems going to add to growth call

Kevin Garrigan

follow-up. And then just as a

at So out XXXX noted and we're X you rest of kind in the to you and into keeps kind months of kind what as now look remarks of prepared few up a gets you tied what the year? tailwinds of your you most

Anthony Ambrose

industrial again automotive, What up will what is a funnel at place What looking just where center. be already is sales keeps is. programming in messier the across situation lot at is people have at gets it than our night looking a world and excited we opportunities and me me the

over any control impact that. has resilient impact us, Obviously, by a have we We're breakdown design. supply world serious don't if were more chains, We the would everybody. global before of than much it would that

insulate doing can ourselves. And what so to we're we

And about stays fine. where think as world be right it we'll as stable, we long the reasonably i.e., now, is

Operator

Xavier The is Devon Paul question with next Capital. from

Unknown Analyst

supply talking about the in information biggest growth, think the every being the seems that some industry like day, EV you said marketplace, out EV it it But I like all the or company the it so individual. companies China's companies new the there time, already about it competition. the with industry, read from and of was changes, first with that even answered the that there's are -- the Fortis as

just automotive about electronics growing with Latin where markets. you them this from see this to said what and you provide an the earlier and color standpoint? more So Does America, -- any your there can other operating is position attorneys wanting to Mexico, you expand from

Anthony Ambrose

opinion and mentioned a China. is vehicles has from think biggest their electric the to for probably Americas the I very CEO region the low-cost that question. Ford others in -- Paul, Well, I what thanks have mentioned, similar the threat have imported from

decade. that's do we're us, that a And for a supplying automotive partially and #X global had grow period. to industry threat. expand, electronics them. to good automotive and the for those as to a for Now strategy to a supplier because we've a We expand industry an companies believe It's in be electronics in want with the China We're grow we opportunity. partially on focused position

forward, And so as it goes

lot a Eastern known how used I to of the Europe, in think goal Mexico, emerging the programming markets. and as to wherever is industry where especially and be Southeast is. change in are what And see Africa, you'll supplied, choice for be cars supplier Asia. of it our auto

Operator

Wealth next Kanen is from The question with Kanen Management. David

David Kanen

question exiting you and business of you ramp can customers $X a to various have? of First SentriX. year have already wins design with on that rate this get million on line year? X-figure year And excess a the is Do sight this that in run

Anthony Ambrose

Dave, don't thanks break for the call. out separately. We SentriX

grew with it software the we As you know, year. during break SentriX and our services out substantially line, which

So a separate going I'm SentriX give forecast. to not

at to to get you you software think million. $X to per look use if and pay out need I the get where question. of the have would That's not

more forecasting. I we're think this certainly year than would aggressive be

of volume. concept about capacity, get roughly the to service around support which put about represent world. platform at a the the you point systems year scale in base to installed of scale, kind it But where we have into X.X capacity. XXX of billion this the can units is to just data programming to listed And that

a business. And in or than by more order more of centric magnitude you and get enough so of an itself to that X-figure is

how And then sold will our we're it, the get microcontrollers be to And this to world of in just of how can happen embedded TAM mentioned, how question not units fast not converting So a But is the deeply is XX which year, way see going after I question them. a okay? microcontrollers. billion there. SentriX. we fast without will doing is convert with subset don't of in they that, the security period, that are overall? It's security The as is to going not XX-year I

David Kanen

be XXXX. we they're our expenses Like about saying OpEx And you're be bring have getting operating remarks, order is $X.XX, $XXX,XXX down. was follow-up to looking $X.XX, to I we your believe, we've think past. return my similar a at down at don't And the I to point, this feet just this you again, $X.XX, mean, shareholder, in that's done Gerry talked I Okay. But successful then wet. ways last don't for honestly, I structure, expense quarter to of $X.XX, you as be sufficient. know, prepared printing think a that expect for I sufficient. like earned shareholders, on to kind quarter, in moderately need his

expenditure get is now because we savings million my can to being year looking every So a OpEx is, what right are barring have done otherwise an than at just a stock question about that of because growth, never we we're $X making to XX% really there successful shareholders. a to to attractive earn investment we to going enough for get more where going not be and we're

that. And wanted the sales could you did if adapter on in comment know to you what then I for So quarter. just

If you as that well. hit could

Gerald Ng

comments be inflation is I perspective. increases we first give as can things. we expense look and what from Number one, maybe cover and primary the anticipate to an to side objective foremost, XXXX, first objective of into regarding make

we're going and with growth. forth. so expenses have We're to have to So with going higher higher associated revenue associated compensation expenses

bottom first of focus which both improving that. is, as to find expenses well improvement. got really cover of is efficiencies operating margin a we've line, So is order next on the to function business as gross two, operating Number

we've initiatives the rest of performance. basically got opportunities the look the of terms in so P&L underway And to improve at to

and obsolescence those will improvement improve costs, year. lower cost So margin line. associated past We help initiatives a and this reduction point the gross all made us the on three improvement, examples, material carrying logistics inventory impact

improved function function lot it Some also of a profitability. that is efficiencies, operational but translates volume, to a is a of it of of and

at. well profit line, is the looking separate On OpEx as team opportunities there's there the gross that from

the initiatives help So improvement. on And whole revenue. drive maintain XX% that that be hopefully net P&L. going cut initiatives can to from the across see a that these the growth and had fall is nice at with P&L, improve fall to we're And across in We ultimately, going to a looking through. that we're that overall through basically looking income our goal

Anthony Ambrose

Dave, message. I'll just echo. Hear the

going we're than able about maybe on to earnings your right talk point. we on willing more there's and our now. call But think I understand

David Kanen

for what was sales quarter? And Okay. adapter the

Anthony Ambrose

Gerry that next the We'll answer put and call, call. into and go is looking up. take ahead next the the we'll

Operator

[Operator Instructions]

from Wetherington The with next question comes Michael Wild Glen Ventures.

Unknown Analyst

So if you that's a cycle, at look is appears of trading appreciates it's EV of sales it low at approximately it when where an kind to stock kind X-year today. your that ratio as

wanted say you it kind to that, idea valuation? your I think about of get your of what's So what about kind

Anthony Ambrose

Michael, for Well, the question. thanks

get let to Dave. First, me back

adapters QX $X.X million the So and in $X year. we million in did for

ratio. least get would think at somewhat what So questions then for lot it's try there. technical least recently. at you some a to to seems it We X-year it cycle, but enterprise analysis, don't be there. one for should, case certainly want I the on of We to most that what's semiconductor I'd it seems to the going in do nature but and work ways understand in those bottoms portends looking it that those X-year on of cycle. where I hit of the on know a a future. you necessarily are guess, you revenue the and not your And I would, follow at value

not morning on other now. And divergence multiples the the business analyst. for I'm Michael, I news the small interesting cap and historic market technical cap for this channel, the again heard right micro the tidbit, paid or between I a in the multiples paid cap was large think

a this of the probably mean, on on am, it's some I might in there are interesting be just guys in than things terms smarter setup you believe there. an to reversion interesting going but you think I lot if

Unknown Analyst

Yes. cash of there. strong you your generation and those maybe one-timers what a one is cash the the about, 'XX looking as a exception in of the and forward? Fair at the for outlook options? And for for your leverage Also plans buyback you flow exited point QX, is excess operating 'XX talked just going follow-up,

Anthony Ambrose

interest a around -- the do on which We -- the for Dave actually now. ways be our this think that income We've to interested question up amount of doing a question return we can cash cash did need I M&A, pretty on paid business. not bring cash, guess that good. least to get The we're the right So better get shareholders. for lot. at just a job And manage we small. is certain excess said the constantly I cash, we We're for we're obviously possible call accretive looking deploy for maximum in since

get have We've Nothing's come radar yet looking. radar can across our historically We our but always liking, the up. done in that buybacks we're we to the past.

the and buyback something us. real to in cost accretive Given the for based is. capital cost the find future don't again, what a of the short-term increased on, of capital right see now, I potential

we'll for deployed effectively each the United income. is as interest make we at well some the meantime, States subsidiaries day-to-day don't to sure the that our in foreign to as our earn look need the cash surplus In that capital finance team working of

Operator

will Ambrose question-and-answer Ladies the like turn would conference you. gentlemen, our to This for and over conclude thank remarks. I to back session. any Anthony closing

Anthony Ambrose

to Operator, question had that thank you I'd very a much. thank like everyone today.

you call. there Thank Given now much. more no earnings . close are questions, this very I that

Operator

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

You may now disconnect.

Data I/O (DAIO) 22 Feb 242023 Q4 Earnings call transcript