DAIO - Earnings call transcript Q2 2024

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, and welcome to the Data I/O Second Quarter 2024 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's operator, Financial XXXX Call. you, to I/O the Second Thank With me President, today Anthony Ambrose are the company's Chief Officer President Financial and Vice Gerry and Ng. and CEO,

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

impact the new demand, and and product and on levels releases record other the ability part on described to other as the XX-K revenues products, global regulations, geopolitical automotive overall, on international activity uncertainties of acceptance include the and the factors for deliveries level filings events, time other of order to the installations, and based and with market to shortages, and press trade including from risks, company's market conditions by company competitors and time activities the Forms pricing of Exchange in industry in Commission, and XX-Q semiconductor These Securities economic changes and those timing communications.

unduly any President I/O Data the relied over would The accuracy CEO forward-looking Anthony to I Data and now to forward-looking to Ambrose, completeness And like upon. of call be under not I/O. of statements. no should is statements duty and update turn

Anthony Ambrose

detailed I'll remarks And at Jordan. our the I'll thank financial quarter over Gerry a call addressing numbers. Well, by to then the and more for second operational Ng very begin my look XXXX much, formal performance. turn you

and our sales mentioned of divergent Americas in various monolithic, regions wasn't and across we performing we business half the our EMEA have however, Asia first saw as sales bookings soft expectations and were below of markets. QX regions Throughout the revenue the substantially expectations. conditions in plan. release, are year, as As below This and the ahead

saw sector. in By in industrial, and automotive the we strength IoT programming weakness EMS and market, centers,

We continue year with acquisition IoT, the EMS in slightly year, location the X new AI for edge in the applications. to has bookings of million strong customer in of Most first supporting and This traction from were contributed increased in a have our of to $XX.X customer period. half of wins the new prior total XX year-to-date. QX these $XX.X industrial and markets over million

automotive new capacity At America. the saw who pushouts additions, same time, planning we're from significant primarily existing in customers we winning North business, are

capacity and partners XX% Together, platform, set and demand our by in processed year-to-date. slowed, reached for center adapters the is Included that in units bookings system revenue we they quarter. saw that While a services. our and software good second SentriX still for programming our of security provisioning record

into go reducing learning on spending. tools will efficiency the pleased accelerate to process improvements including these and we structural are details in spending more AI costs. controls Moving long-term made along efficiency and deploying on the focusing product We We're to but efficiencies gains. other progress made and direct side, QX. on machine spending significant progress Gerry with capabilities

QX well taxes. an sheet moved gives dividend on us as the cash from sheet and U.S.A. associated Having more to the balance balance Our remains We in more the the as U.S.A. cash in paid to cash. China earn on opportunity flexibility the very our strong.

investments. EV long-term a We view secular wondering cars electronics to see engine softness and models. the measured mix inventory internal are automotive of Duty at development plant a when hybrid a least all investments nameplates still approach returns. their that EV Looking in and and as engine capital to related meant and or and EV recent which from Oakville production content for trucks taking QX, internal was Automotive corrections this their example originally trucks, to are QX in Super is is Super assembly of Duty The growth combustion an us to demand to change in product. recalibrating in Ford moving combustion

Recent automotive as Political holding uncertainty also around demand back U.S. do going forward capital for companies customer reduction automotive may additions Tier interest QX, however. and our semiconductor Xs, OEMs, in not be a equipment snapback policy base. hopes in as statements well by in suppliers rate indicate

historical demand once to add move shows capacity. Our sharply auto decide they experience electronics

We in plant have quickly move to demand the capacity manufacturing place in once returns. our

have they also as capacity. our as new our more technology to well releases for This trends. customers programming automotive begin for UFS entry-level recent add includes right the programming We technology as

being we shipped in Despite will capacity needs things significant control: of expected continued return. cost revenue XXXX. and North their backlog amount the focus softness Our to on to continue as ready progress customers and for automotive, right as the recognized the customers, and with that's can be still in there's products controls attracting and be on spending contractual America new of half a the making second

the benefiting pass given As that, model, and costs our look leverage made the Gerry backlog, especially I'll Ng. managing we operating to from ship to over this progress we Gerry? With on it expenses. forward in

Gerald Ng

on forward, condition you, recent look the balance contribute sheet points commented unit on Anthony at perspective of as operating We sheet recover, reductions comments focus Thank of our performance market day cost more I/O earlier. a the balance spending and current structure, of end Despite QX. maintained Anthony, My and remains will a XXXX, half for which headwinds, the progress lower to automotive into and strong improved markets in cost forward to healthy interest management. efficiencies, financial strong detail. heading a to and and backlog will financial elaborating quarter of the performance the key Data our today as our good looking financial second on on including I second outlining XXXX everyone.

Despite and Inventory from maintaining $X.X at cash the operations. Cash $XXX,XXX strong volume QX and and $XX.X June from half at from expenses, $X.X the the operating as receivable of is million offset million XX, cash dividend days lower the June collections remained in beginning shortfall, million QX. which $X.X tax down $X.X revenue $XXX,XXX second to anticipation loss deployments XX at increase million volume related end relatively by reductions at from of system benefited a for of China $XX higher continued of were XX from customer outstanding million quarter second or of steady million low sales Accounts sales on a and steady as our DSO repatriated a XXXX. exposure. lower very credit the quarter the backlog of day at sales

The $XX.X [indiscernible] from end XXXX. Overall, at capital million have at of continues declined QX no $XX.X QX the million the debt. slightly the to at end company of

income to Moving statement. the

from Second in to year Americas quarter reflecting revenue at extended the region $X.X of sluggishness $X.X million timing our and was the down shipments. prior with conversion XX% period million compared backlog

indicated. Europe, $X.X in Anthony Second Asia quarter and as were million strong opportunity on conversion bookings

provided offset Americas XX% Our consumables a services the at sales, in system the of CapEx software helping base year-to-date steady recurring have region. revenue total of softness and current

at by the million has from backlog ending beginning Finally, QX increased $X.X million $X.X year. the of

sales XXXX at down year prior lower was QX X margins. the gross points largely from to XX%, percentage to level due volume. on Moving

QX costs. points the manufacturing XXXX mix material, our favorable improved However, The reflects QX reduce cost preceding X quarter to were margins product service and efforts. percentage than initiatives improvement and from control higher ongoing

I'd and like improvements progress quality improvement optimization, sourcing all on to expenses. process reengineering, have address value to contributed the overall the Product impacts. streamlining sustainable we Similarly, made have operating and

prior or the preceding improvements. IT quarter XX% $X.X initiatives overall and quarter. Second operating down costs outside critical through $XXX,XXX year down and Core prioritization million, personnel, from were and XX% efficiency other from services expenses of declined or the facilities,

the cash This and mitigate company efficient to partially has system compared QX and the lower and will quarter XXXX. improved. largely income. lower interest in partially second offset was financial the decline expenses $XXX,XXX related was of shipments for lower by $XXX,XXX of loss improved of higher cost and market performance a allowed from overall which income the revenue. revenue net decline expense repatriate for conditions Again, incurred structure significantly contribute current a when to to The the net tax company operating foreign to due China,

market was to: each and operating China opportunities position, ensure and a interest Overall, overall support we in challenges. tax dividend incurred our operational financially, our earning $X.X China a from the cash cash optimize available foreign strategic cash remain This strong operation, company A from of was solid the our very liquidity the potential the to in the of $XXX,XXX debt, holdings navigate parent position initiatives. number and one, to needs paid million to reporting of ability no U.S. operations increase future U.S. and and undertaken in

expected backlog second Operator, the we the my be of earlier. to shipped as contractual revenue recognized for That and ahead, have Looking leveraging Q&A our and of the quarter in I've half discussed concludes well start made in costs would second progress process? as XXXX that managing remarks is the as you XXXX. please

Operator

Instructions]. [Operator

David from Management. first The with Kanen Wealth comes Kanen question

David Kanen

My and a let's go-forward volume cost volumes gross say, reduction various million the on get even theory, significant on of couple, expenses a from can good in the revenues with sustainable margins that XX% I'll And gross there's of to go queue. is, the then increase, to goods, question I'm benefit first Got $X taken measures as were the into to million on assuming job you've back high in XXs, a cost increase. if and efficiencies. based margins increases. $X Gerry, basis into

Gerald Ng

we can. Yes, believe I

Let example. me give good a you

$XXX,XXX our see, revenue get income structure, and XX% we a typically our loss. we future to fall-through increases. our on fall-through quarter, the efficient on -- extent at was a our cost should million, was revenue that For operating We revenue $X can a XX% similar maintain again, current

to our line. correspondingly, we and as X% corresponding X%, bottom see goes the to revenue comparable through X% a should to fall So from

Anthony Ambrose

the there, right. revenue. I the Yes. is Dave, The just only of Gerry is the would It on depends thing add mix, location

know, structures you sell we different versus we As selling and through margin distribution direct. have

So comments it and a mix then kind assumes of normal think just stand. -- I

David Kanen

Okay.

the what So is variable incremental much be is $X to you distributors. What let's put question million don't next that or million example, And the of know what -- component? $X variable on as of revenue? Is expense that. XX%, the say, is is revenues mix it, million normal XX%? going were we to how a assuming for the Gerry, But instead next direct $X on again, through the So relates million. dollars it

Anthony Ambrose

Yes.

in So this. I'll interject Dave,

will be again, situation go be travel. stuff higher. primary being variable in going the going electricity other that's as expenses. to be I much. incremental some And lower. burn where be don't to, think that's expenses it's build a to directly, related we But be component. operations to sell on But they'll as how in And more we're that factory. product. the we anticipate much there's sales distribution, I If depending primarily we're not those through obviously, if the might not much to the There not might G&A but G&A incremental again, build There very --

Gerald Ng

Yes.

costs, kind those get that, associated again, we of logistical Just material on should variable you And follow are if a revenue, expenses through typical typical to our revenue again, to leverage with fall impact. commissions, add activity. costs, beneficial freight

David Kanen

Okay.

XX%, delta but in variable will up. component a normal -- now to What revenue, is down with the approximately? it million on trying mix what assuming is is that SG&A go I'm $X XX%? So

Anthony Ambrose

told the to. that you when where people, are, Dave, operational leverage it the But be where given out, is always comes we we've people, operating we've that's net better. Historically, everything leverage told always might

David Kanen

Okay. back everything then expense we this or in there And at half are of year? guys, see completed Or juncture? efficiencies the that the reductions incremental should is

Gerald Ng

work have continue more A particularly but we impact. of through these the a some opportunities. on as smaller lot term material of well longer-term reduction have be won't as that longer initiatives It kind we short-term may benefits, sustainable as cost to

continued we we move some forward. So expect improvement as

David Kanen

queue. into hype promise. intelligence. Okay. And A around lot back of I final question, then I'll go artificial

and about out of opportunity, So using affects your impact for of and various guys the that if business enterprises know how I sketch deployment on are us using talk your it business? But their could you it. also, AI, any? if you you Anthony, the AI can

Anthony Ambrose

and just would to on latest you Sure. And our website. refer all material I investor the investors

that some called of as has better well the I little think and it in conversation graphics. looks X others Slide a But like short, of applications the products you will we've a there's Edge give built Dave, term identified AI a this And set that be require and able in AI. leverage bit implementations will use series AI better, an to capabilities cloud. And around become example. they the it's but I'll of to not

application, be this for automotive Advanced ADAS, So would an Driving Assist.

to You're for back or connection take to right a latency directions not. and go you're on whether not to on a unpredictable turn go the going to Street Main with going cloud

You're have around we've go. from you're not other the as cetera. set It's learn industrial car whole There going IoT are smart of cities, teach to homes, going cloud. other to to metering A smart of lot the you to -- smart a come et applications applications, to going automation. applications the talked about have

you The there. about minute size. size in and right, you code a applications that AI ADAS Data benefit machine automotive just bigger. components, of Now I/O increase a gets those the talked demand add The increase learning see number lot we or and code We've the ways.

that developing platforms, smaller of size for even is ensures older newer replacing that some platforms us. may you're also which It good have again code the

segments the I AI in benefit the So AI whole will called this various just in that Edge is directly I highlighted. market segment I/O Data that more think

Operator

And with David the Singular from question Research. comes Marsh next

David Marsh

talk the could on promising just some I said of bit. guys little you thought you us broader automotive you Americas start mean, I had and India. pretty you kind a we the perhaps bit Maybe guys a I give China side. those in little So a we just guess, landscape. opportunities global just of about could specifically

Anthony Ambrose

Yes, Dave.

Asia we as expected. in opportunities promising closed the of most basically, So

my far ahead QX gone it's strength haven't the industries, I just a we by in partners, similar competition they CST. China. all We've And with other in of channel seen on other for And set a in plan that got a is to they're any seen that's and deals to pushed that out. but activities. strength Americas, Fiesta in QX, year. very know including similar companies Asia went -- their of some been seeing The contrast, from checks

also, something they're build capacity build big Automotive U.S. instead CFOs there's the to there's And in on how might just Mexico, digesting much and X really the they depending reductions. to or can. talk something how then of after years -- election. X% going corporate you're X.X% have a out much in figure rate to trying interest in like And for if of to been pay they us for I Mexico, think the

And so think that's to I contributed some the of also potential weighting.

Xs, from comments heard talking rotation. a NXP, Stellantis, You Ford, some of about Tier really the product also

think hey, run can. got we I of to, So what that all factory let's with as long the as contributes we've

I they mini I and bump, And with ago. 'XX a automotive saw as our with in and know, in we it always think, the come when you away. seem -- they're right especially it is to where and We ready little demands -- saw XX then experience guys had need with 'XX 'XX in buy, to that months We 'XX.

rapidly. among I a I'm just And comes it I telling ever quarters for I've back, the come out. roughest will fairly back was pushed you, seen, think But it so of terms it everything when region

David Marsh

of there And a in there, I of I software-centric your helpful. some I to with then did lot Can were I didn't more to really really catch to And what's bit just talk -- just some Q with you on breakdown revenues, a comments regard kind clearly That's there? you but just want but get sense detail. recurring. of for the going -- specifically you growth maybe kind the about us because wait obviously, Okay. little line the it's mean, guess, regard us that's of could for give the you specifically directionally got business,

-- sense you just us just So can a give of

Anthony Ambrose

and okay? combined So record I a shipments you processed It's ramp from programming there. SentriX that a units question upward center adapters, our software consumable perspective, SentriX, a first we have that's by year. the had I the at to in one back on overall, pretty of continues when our don't XX%, a pretty partners it but look with steady year it's And XX% and revenue half. record, think, was close it's been to the running for look. typically know I XX%, our last if But go And

of year. revenue So between almost goal split about this long-term systems. so we hit recurring a We XX-XX talk far and that

demand that's us the the the of couple quarters doing help cash is preserve things be you But reductions Now admittedly, continue some with then a because a were consumables on to of good have systems to when bit. we ready divot around. we strength orders in turns the down when that expense really will systems and the a it have have when indicates Gerry combine which,

David Marsh

-- not like trying just you just much trying by business that over I there get advantage And China was had is and It's last quick the one to mean, opportunity reading need opportunity not there going that kind you're mean slowing took that means, business not, support to cash read or Okay. you're indicator it. an an to to any from -- then this. in you to of of I'm feel one. Am I it. repatriate you into that's and But the that understand anything as operation. correctly? I cash and there

Anthony Ambrose

You got it.

and for to flawlessly, Germany. in his to it substantial the the U.S. But Gerry And bit little though us, that do support tax operations we more interest. is opportunity benefit having the you flexibility even the on and pay you a to indicated, in earn get you have as those to in working U.S., continue we earlier, indicated As have it's we the and operations China capital maintain fundamental that. of

it's just And so clear. the talked with we to Board, pretty this

cash and and go move the repatriate on. Let's ahead

Operator

Capital. comes question with Garrigan WestPark Kevin And from the next

Kevin Garrigan

a couple Anthony, me questions. just clarify. Anthony and to ask thanks Gerry, of for letting

that had you bookings saw -- seen your strong said QX, has across all demand end markets. in So

just in interest So market, noting things to out automotive rates, like ago, companies a in see waiting compared as demand X the all? are of mentioned, at months how kind they are play significant to decline you

Anthony Ambrose

can't mean QX way basically what explaining that's mean just but disappeared happened. softer in I I I come Kevin, I -- it of could North it, Yes. a with America. wish in up I

Kevin Garrigan

makes sense. Yes. No, that

Okay. of kind Yes. wondering. was That's what I

to then in And half confident second you're year. sound back pretty Okay. the orders going log that of the you fulfill

kind what confidence So orders? I the consist gives pushed these mean, backlog your canceled? does out get orders Or or you noncancelable of of won't that

Anthony Ambrose

are but behaved when literally way don't has one see the Some they after down people industry are don't order, hours customers X of COVID behavior some on had it But noncanceled orders sent not, terms hit place once We our cancel an and in the order. okay? one exception traditionally on is that they cancel. us and the where knock customer we shut canceled wood, us come

up Now not we to they right our until something so terms But the have us. that's standard ship. under plagued do it's

David Kanen

it. Got it. Got

On automotive a large might that for markets kind say then sense. Edge ADAS earlier last for you're little Okay. are That there would and Is a guys. ADAS regarding take question makes as of be I And off bit I taking But now more than just quick know you application AI Dave's seeing expected. question. another longer

Anthony Ambrose

around automation a everything customer, automotive the past wins besides We've of X including it's wins, in And of factory a was new over the QX went number the more skewed I I bit automation, the and I smart location couple auto deals Edge X new with IoT over we years. And the AI of list the towards little wins. X. on a factory number won think had metering. mean, there. of earlier certainly

going it's to I -- automotive. So that it not mean, has not displaced go far. yes, I'm

represent on rather interesting come sooner us, it continue than we're will does automotive later. and that. think back, deeper growth hopefully, for opportunity a going to dig to I some But little

Operator

remarks. ladies to any to and would gentlemen. back our you, This for over like concludes conference session. Thank management the closing question-and-answer I turn

Anthony Ambrose

would to asked who you everyone like operator, conclude call. at I to I'd much. very thank thank this like point, questions. Well, the And

Data I/O (DAIO) 25 Jul 242024 Q2 Earnings call transcript