SCKT - Earnings call transcript Q1 2019

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

Operator

Welcome to the First Quarter 2019 Management Conference Call. My name is Adrian, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note, this conference is being recorded. call David your Officer. Chief turn now over Dunlap, to Financial I'll go sir. Please ahead,

David Dunlap

operator. and for Thank Mobile's afternoon, XX, Good you, everybody, today ended – review XXXX. quarter conference welcome to financial first results its December March call Socket to

call Socket is On President with Kevin your answer today Officer, Executive Chief to me questions. Mills, from the Mobile and

on Socket release has The service earlier Mobile today. distributed its socketmobile.com. been earnings Socket's posted release at over the wire website also

available call shortly of the Socket replay addition, posted days. be few completion and call In on a the today's through after will company's a a call's transcript will the socketmobile.com, website, within of website this be

of so; XXXX, Securities Mobile statements and everyone Section limited including we uncertainties, this amended. of products, to, actual in of number predicting its sales predicted and capital; availability may risk or factors, results statements statements collection statements Socket's not application as differ of because in the may a and may not and that details the well the conference anticipated; Section Socket's and trends, I'd from as to, XXE of mobile Socket's with statements acceptance of as which the of risk and of collection distribution call Such not market Act not or meaning markets Such or XX-Q the forward-looking Socket's products and Commission. not delayed and results of financial as be and but distribute sales application that XXA products in Socket but happen Act reports opportunities conditions mobile Securities markets in as amended, forward-looking to and the such doing Before market in products to be the not include, statements, data products. the product forward-looking and risks may current happen distribution materially due XX-K limited of Exchange products technological, Securities on partners the manufacture the vertical begin, the involve market including, acceptance that factors opportunities and acceptance Form that working in other of risks choose market timing, components remind to channels as XXXX, successful risk not and that sells rolled data contain could and anticipated; anticipated Exchange risk necessary the filed like out may as regarding including within recent most may described are the

not does such obligation statements. undertake Socket any update any to forward-looking

that to call with said, I'd President Officer, over and Mills. Kevin? to Chief the turn Now Executive like Socket's Kevin

Kevin Mills

Thanks, afternoon, Dave. you everyone, for Good today. joining and us thank

quarter revenue we the a transition depreciation taxes, our the first our a compared $X.XX products. $X.XX our that profitable a same the earnings XX% compared year a was the compared QX to in ago. loss new of million, of was and increase net a year same XXXX, Our an QX small $X.X previous amortization, a a $X of EBITDA, $XXX,XXX and the revenue in hump interest, $XX,XXX revenue of for before year the which finally in indicates million. in QX is a of share are quarter $XX,XXX first was per of family quarter share over per profit We of ago, in to to in quarter to year quarter over ago. $XXX,XXX, $X.X or a first quarter's reported XX% and compared loss million to of increase

older XXXX, were are in over achieved enabled though, of equivalent the products from QX lower versions older new. products prices, to increase even As the customers the the outlined QX, and new revenue or products profits. we and shipped more which on XX% to small compatible to previously, improved XX% a us products we XXX% In move slow show

did results, this during whole development In solutions and to expenses and in to and to notice invest continue thus new you'll a manage us our we our research As the in improved market transition from enabling bring financial tightly period, good be point-of-sale to Shopify, we and market iPad-based good point-of-sale service and very of systems. the continue many Square applications the where other point-of-sale to to our of revenue XX% – benefit position related applications forward. going from QX, from came from popular about adoption

number accessories, government our sales new Japan, building services. systems, merchants fieldworkers, charging approved these iPad-based category The there small about from In more as the other products, services to encourage sales. out-and-about QX, options dock, to such online We where for commercial transition commercial believe of to point-of-sale associated such workers. provide an in our which position our of our and bodes covers solution. as segments have came inspectors revenue and our good scanning incentives applications combination from seen strengthens future our We with are also market well based and of XX%

as in impacting customer. many for X, see our X DuraCase have of and began the by DuraCase We to While commercial services, X than introduced QX. is especially we will QX, serve better still new we believe customers, iPhones. and also as of category for not if expect iPhones, and market stages, February in believe which in overtime. to do sales substantial this several we big, iPhone reasonable early is to it segment shipping this very retail they be it early we commercial needed that saw services products already bigger, late sales in of its Including a the market would is In

round venture category plus customers XXR addition, The by chargers, are we with XXS are end-users. our this in continue which of many larger and required family for iPhone companies to This good own very benefited not has to good therefore, contributions In healthcare. vehicle products support and develop their market plan from to accessories logistics and growth In these Mobile now for saw longer has iPhone we the developed funding workforces. and QX commercial Socket apps a applications a and like class, of their transportation are additional to both Many revenue and about of is long-term for taken by the and opportunity. QX, X% market represents just the coming accessories from services during also with market.

continue going both expect these categories forward. grow We to to

from QX So of will believe year continue view, strengthen our we point with progresses. as are a pleased to and revenue the sales

point-of-sale especially to expect end expire We our segment point-of-sale These the as market benefit from government incentives will the retail retail QX. dominant in systems. in XXXX, Japan of at should remain upgrade to incentives

pleased over successful, We are improved SDK to this moved also have new Capture developers transition report platform. development has we and new our to that been our and

continue see scanning We their with support the steady growth number to applications in advantage. deployed being of are that

We expect back and is a good start. to will With now that to market over to move and increase turn to off Dave. the XXXX our the like summary, revenue in profitability I'd that to as continue we call position So as forward. feel strengthen progresses, our we year said,

David Dunlap

the to and over to worked have Completing our was step more the like our in our Thank life; over first or XXXX longer lights; features, need up status durability; XX% agonize over year-over-year. to the priced breath air compatible, below well, products, into picked by volume at a quarter ago XXX% decision revenue more did including were which battery of XX% customers the you, fresh buy indicators offered they replaced. a sophisticated and newer year improved customers. quarter same of program with they product Sales colored No loved increasing were with or products, products for longer fourth in period transition Kevin. which

orders during improving our become than margin steady profit a million; the allowed first strong $X at million revenue the to $X.XX Our with through quarter. held steady held received our drop and bottom order small at our operating in pace on more XX.X%; line. to expenses We

outlook growth system expected the that subsidized product as the of revenue need such visitor Kevin in and for products. the where initiatives, by increased introduction a during Our the new government margin were for is improvements mentioned and greatly year. tax Japan sales exemptions further support to is recapture identification continued

much the happen in offered with of upgrades part the expected solutions XXXX. being to are to vendors We of

we completion deployments, and XXX tablets. larger increasing present. of steady into the Android absent on forward. move of running numbers focused applications applications These to Windows in product at XXXX also than expect with being the some Apple, in incorporated on largely smartphones small With in our products is And market more transitions, seen applications growth point-of-sale businesses our of we've and

Shopify, by point-of-sale Canada; in the to building received Bit, also systems other our market. products systems offered such supply We and largest where cannabis in point-of-sale industry, by serve providers Green shops as areas, are in the highly incorporated of major one a are in that system cannabis application are to point-of-sale the providers; regulated by this seeing growth contract other which

Our growth. beyond which traditional networked also mobile and transportation markets tablets. needing are and of collecting mentioned add logistics the smartphones markets, will in data and databases these on include commercial to Capture markets corporate revenue the being Data our services, These are point-of-sale, expanding by Many healthcare. Kevin, applications as and and are

models. requested Apple our highly also X of products, their And features and to installation warranty scanning quarter We've developer programs product approved to applications. in Apple years. X, one-handed barcode have giving continue a overall up advanced products. One Key accessory are alternatives. a sustaining our experience. the products released as our the user to our into product five incorporate been recently our replacement products expected upgraded decisions and range repair DuraCase products, We the all An and for of are first of we for on to the barcode application chargers for products system the most our growth New phone warranty, impact Field of customers such positive of to use a has revenues. upgrade new stands, our which DuraCase scanning SocketCare the wide Communication one supports X our Near to extend periods also

process growing profitability. to Xamarin developer speed into is an remains and the growth up excellent sheet of Sophisticated capital, funding reporting of and and We Profitability tools our with Apple and operating in supported community. our working developer continue using up tools, should make by coming balance credit believe carry-forwards task cash. loss revolving environments very to combination including or Android facilities support, applications attractive generator our more writing net our the anticipated the us of with to Java

to the products market we to Our Amazon, respond demand have capacity through And world. component the evolving are product online around quickly as opportunities. our readily distribution channels, and and such growing suppliers available and to

call turn me the operator your to for let over Operator? the Now, questions.

Operator

line that’s say unnamed question-and-answer up. please? We'll now the your and is company Hello, session. we Can name And you. you do queued line an begin Instructions] Thank [Operator have open. your

Unidentified Analyst

Hello.

David Dunlap

hear We Yeah. this? you. Who is

Unidentified Analyst

going is Good. excellent a days, optimistic as is, on question completely company, the Congratulations very really viable quarter an increased or not and and visible. some is lackluster. forward. Okay. My And trading public guidance Socket revenues

public was plan wondering, you investors want as how do? yourselves to present to So do to What I you a company?

David Dunlap

first Ralph? this -- I presume is So

Unidentified Analyst

Yes.

David Dunlap

Okay, okay.

So, back is get first well, profitable, as said past, think think, want I we thing I the do just which the to achieved. we the we've in to

it's that these with, or we other very we our I that over the see. are And, us yes, become better the is think that switching investors. this. and None I we're story have systems, That's to past. therefore, as Green to in better intention. to need Vend, that little point-of-sale bit difficult uphill actually people But able but to we'd of iPad-based we tell in of ShopKeep, this. to mean, they really the a of think or bigger work or explain build whether hoping are companies. the service do a grow explain the focused go little public be And story for some to and public that we would companies we one on potential Bits, market we'd others point-of-sale the to therefore, we I bit plan and companies out need on have battle the as of

will transition but the didn't we in feel be we mirror. had our going So this doing Investor rearview related it more was activities appropriate in forward, we until

Unidentified Analyst

important but Right. think looks. everybody a what's and know with tell, there it's I great letting out have agree and how be the on you, I going you to story and great future to now

David Dunlap

Okay.

it. follow We will take advice that and

Unidentified Analyst

you. Thank Okay.

Operator

next with Securities. And Brian Sutter question comes Swift from

Your line is open.

Brian Swift

Hi. Thanks.

David Dunlap

Hi, Brian.

Brian Swift

walking be to might happen out downtown noise Francisco, background. little San in the so hear I you a in

David Dunlap

We world. in live mobile the

Brian Swift

call for to percentages are right now Meaning, that you are the results give orders little of where noted, low million you you've the mean, the and in you whatever revenues, evaluation increased us more -- on customer your transition process Because now? where this I still as be want color or more or we it, What Yes. with is have quarter $X quarter? And gone before? year. to we've On year-over-year, in ferry now a wanted business past have than certification, my way in in transition base? $X boat. doing least there that halfway first the were is they way you thought you've I at whole what? well, at there bit would to that with a there period been you're through who you your I million

David Dunlap

Okay. All right.

XX% than more So, there, right. I say, would we're

of color that. let -- bit so to And me little a add but

point-of-sale all, pick an the get of shopkeeper at go to And right, and from pick recommendation they SXXX, we just sites and customers one scanners get I change provider, typical okay. example, First the for as to to to need with had the case, XCi I the a just recommendation take buy. that in random to their their if

who okay. XX% I their are have some updated so have So confused, this. customers customers done still the haven't that We we XX% were changed say, to websites or large would haven't

the general sales think we've had none for that now what that the people know confusion. I lost before the news think would has us there But none not them. I we're been in a seen and buy, XXX% do is marketplace And through and in customers of we've of products pickup to we're we result. XX% as I confusion that say, service. good But the transition, the

Kevin Mills

in a quarter. also We're Brian, lower traditional first more point, than

it the the it As very of the starts strong in point-of-sale first stays activity stays latter quarter. up quarter, -- middle picking of and part you typically, recall, fourth through the very the

addition do described general to and that So pace. newer to growth in up with phenomenon that, pick expect products we what will continue our the we've

Brian Swift

your how was how far? point, is that April? on going We're Or so it

David Dunlap

QX Yes, now fighting cost. quite product positive build we're to We're not the mean, we're so of pleased. this feel end we're started QX quite and a less this that and continuing I momentum transition We market fighting confusion solidly, in less these confusion. that

Brian Swift

a of that have significant if Is last any one expecting, orders what missing this, some to you little I I something on there, than more one And I'm going was gotten XX%? revenue am XX% see here? out those -- it's fairly ramps? Or

David Dunlap

you orders software. obviously, -- many Yes, day every many, from well, that ongoing, have merchants And deployed the particular I no, who I Brian. orders are small point-of-sale a have think mean, we

not basis. because product weekly, sales. that one-time we're But flow I they transition are a sales. that now pickup disrupted think what daily, But on order. or people They're what in these to the a SXXX, were should that was clear it's monthly SXXX sales order unsure they seeing

be application, come As or size probably back our one CDW. whether they're scanner And most was recommendation sales. sales and slowed we is Shopify. which buy you cause And by We're at Square -- know, it eliminating two that that the again. pick that to confusion the will confusion, that their but average Amazon most buy to deployment up the level customers Shopkeepers, through because of reckon probably under told our scanners, sales

Brian Swift

one Okay, balance one I guess sheet last on side.

debt see the And you're situation? down? pay with Or you are where So to able continue the… do that to

David Dunlap

Yes.

quarter. down believe about I $XXX,XXX the end So to the of at we're

Kevin Mills

with the are in we terms bank. Yes, good

was shortly loan and you a dust million was the it repayment down after for period. over to up set As two-year straight-line settled, term brought the know, $X

smoothly. going that's So

lines cash. our our available well own have us credit to as as We

Brian Swift

Dave thanks.

David Dunlap

Brian. Thanks

Operator

from next question our And Hamilton. comes Will

is open. Your line

David Dunlap

Hi Will.

Unidentified Analyst

there Dave, was the so? if wondering you this unit Was to around up us you I provide XX,XXX mentioned scanner I know or actual number? XX%.

David Dunlap

Yes. In number. told you a you just second, just the get ballpark, if I'll actual

Unidentified Analyst

Okay.

to mix that so models? than a bit And newer down just and little ASPs the were a the

David Dunlap

-- of we meet XD to less scanners the expensive. combination conscious up it's effort Well, made

you're So overall move, the on are ASP but didn't those XD correct yes, down. so down ASPs the to prices -- XD the is scanners, scanners

Kevin Mills

And the XX% ago. a QX unit compares and number year about XX,XXX, to that less quarter a is for XX%,

Unidentified Analyst

Right.

like That's lumpier your orders? normal… that, orders helpful. in Okay. Or And any a it there was was enterprise-type

David Dunlap

over mean, we get No, do units. I orders, nothing significant. we had but some X,XXX no order

run Probably all might was business. rate it So and largest the that deployment been XXX. have

Unidentified Analyst

the And when look pipeline does for like? enterprises

David Dunlap

It reasonably actually looks good.

Our control. our difficulty is with the that things under this timing not of these is

it workforce enterprises particularly numbers So tend were at to yes, with we've when some the more be of and their their been commercial working related larger. and to services comes activities

pretty good. pipeline is So the

Unidentified Analyst

did that opportunity, the quarter? confirm And third on incentives tax Japan the Okay. in say, to you then just the

David Dunlap

did. I

requirement of So currently it as things. are put XXth. end, set the outlined, to I starts incentives October. The on think to up encourage on when in government has doesn't And there's people those September there some be two but to expire the Xst currently incentives

Now they extended, current know, but may not, may situation. don't the that's we they get

Unidentified Analyst

you captured could view? it quarters So I largely your the mean, in opportunity? the what's two frame be -- would next in

David Dunlap

yes, Yeah, we good that, mean, a I portion. feel

think wait it's last minute, can. human People I to these things. till is if they tend -- nature global of one the

so already pickup a So a not expecting first seen surprise. bit We year of quarter, this begins in April. on Japan a of Xst were which far. we see to have the Their was picking in up fiscal the good

think a they're doing a because the get have golden we emperor. We time They're year reading this mid-May. will better double by changing I week to

would But people a in of good of August-September of particularly incentives, kind quiet it's So these portion time the Japan. in to expect avail currently we timeframe.

Unidentified Analyst

doing were were revenue, north $X were the guess EBITDA million, go XX%. margins back last of towards, I I that you speaking say, time margins Okay. to of

David Dunlap

yes. Correct,

Unidentified Analyst

Or the outside should of our possibility temper thinking terms is that in markets? again? the So we reality or

David Dunlap

no. No,

efficient I of more with fix think that A we line. the we're costs. more volume, we the do and can falls our quite cost when to more have fixed, lot are bottom

So I think XX% million, plus EBITDA realistic. as those we get are percentages back about very $X

Unidentified Analyst

guys. All right. Thanks,

David Dunlap

Okay. Thanks, Will.

Operator

from Instructions] Steve have we [ph]. question Swanson a the [Operator And

Your line is open.

Unidentified Analyst

generated Dave, and what it cash do how operations by quarter? was much did we the with in

David Dunlap

wound investing know, grab working details. cash. as under $X Well, lot million quarter Operations let with first you A me capital. was we itself, the just just up in in of the

we've preparing we that for went about up So our was $XXX,XXX receivables almost Inventory by $XXX,XXX. growth chatting up were the about. by as been

the that operating leases accounting round side. up the On liability both up in and and change we we hand with picked -- an other asset the

our about So, big we not to some working do general, of credit cash, in about equipment, $X.XX so expect see primarily of made tooling own expect flow We we revenues. and the property $XXX,XXX that higher to finish $XXX,XXX -- from What kind use to million we we deal And for go and with in in time, so actually in as cash up tooling. cash forward -- a capital And and capital, investment used growth that profitability. we to washes. growing to our adjust another -- resources. return then in had we about expect through which see will point up it’s of we working of want profitability we and invested the profitability product,

Unidentified Analyst

taking dozen two I XXXX? I'm I is turnover products. this products trying advantage our it We understanding understand from to five a enterprises last our year is, secondly, it the how pipeline of that's it are many guess large is of at looking deployments didn't -- year dozen? looking sales guess for because to or there. mean, two my I the actually better Or is the really this old equipment. we have enterprise And enterprises didn't potentially? to have any any new I enterprise over Okay,

Kevin Mills

number Zebra, or high they their on say There for handheld logic They're or customer device for of type and involved the of do decide this. process may be a doing. And plus, definitely I decide go. has right. to would Honeywell depending and or Android forward well XX field move Apple-based type and probably at say current want to write somewhere I add that not us Well, trial what -- might not. region is level that the an the using suitable they a that customer and run device. change, may at or suitable is these workers is with I the three application trials as We're been months we the to historically either to two enterprise that they in caution on it's with XX some in opportunities but then The have would the in a

difficulty forward. has as we'll but determining Our they timing, be going happy report been the happen to those

David Dunlap

kind a other in in to of should revenue that And significant we being participating and talked as the program of are number government-sponsored number that opportunities folks some systems upgrade that But sponsored such be also about project of we solutions. by retailers that's that retail a Japan. offering are

popular that X, -- for of we DuraCase most X with products, Apple first I was X, highly Apple and when been our along the mentioned iPod. requested. it's the with our the Apple DuraCase models So, X introduced And X X, very the -- that new one and

we So, will number all our with have revenue. a positive should a that opportunities of direction expect

Unidentified Analyst

the What's adds? last your five viewpoint organization question on Okay, we year. employees course over about in the last One for of employee great. added XXXX

Kevin Mills

additional guess a that we'll employees. few continue would I add to

and of for You engineering. And areas these the fill additional continue in to got and we're then some production volume quality increases. control folks going some add with to

that. previous again, from but we to expect increases over the -- and with greater So, be we can it I down I if -- expenses much we will certainly about year even than don't operating -- this there, do don't hold those XX%

Unidentified Analyst

to we all? increase organization the sales do at expect And

Kevin Mills

our in sense. not traditional Well,

actually A an actual about shopkeepers but from to not then via out, to the cetera. get most us. sites, from what customers time selling of pointed buy applications we the more the to information Amazon, the their et Shopify and thereby do if of As lot go and the

to ability customers. interact with the those have really potential don't we So,

in selling, doesn't our those there involved But to and apply additional really and service application-driven. traditional people support the strengthened have some will be what people logistics better it's think mechanisms it about that. We because

Unidentified Analyst

sales thinking more agree understanding the Yes, your process. wondering with was that if of support lines the real are to continue the to your along with I developers I guess support they to just or developers products. helped with I say I going business. expand who to go was and out organization clearly questions you're salesmen potentially on the along who of for as answered or the need things

Kevin Mills

but actually Yes, end will up that in our engineering section.

So, we've yes, Java we support well in we add developer in be and areas will add in as We'll apps, cetera. as STK. are web-centric invested continued where on to expanding et like better

correctly So, there that there's as is classified point work effort. out, but you really a engineering, sales a lot is as of

Unidentified Analyst

Appreciate the and info. help the Thanks. Okay.

Kevin Mills

Thanks.

David Dunlap

Steve. Thanks

Operator

we questions this time. no at [Operator Instructions] further have And

Kevin Mills

Okay, operator.

Operator

Brian line is again. Swift your up Brian queued open. just apologize. I

Brian Swift

right All follow-up your about question just I yes, want enterprise pipeline.

So …

Kevin Mills

Yeah.

Brian Swift

you … interested transitioning. terms you're they're of to what would in consider most be was

and where something there seems what in would that you've some had were lot when particularly more people to a have it because position maybe Is to to be that done funny and looking so you on? them us, at be product. have your particular attractive new You more than before,

Kevin Mills

okay. Well,

in sort To to run number on control developed use of to we're device to So, And a enterprise is, Android an need application side, I their some That's Apple one member supporting device, a or me, objective. that think question off-the-shelf decision. think the it make process. whether can this possible, that the business. primary their be they I they

we on we're going First, they're an how device then decision believe device based they're device, dramatically. need or support an they based increases they've what scanning. to Once an can interested must they they Apple and that to must the it Android and going made them then do Apple in have use

know cetera. the we've lot we've et side, it to be it stuff more Whether be they things I to So, robust, to that SDK develop that go our well, don't their done done know better as I market. to it a -- efforts integrate easy to support making of on

So of products really much people a the products put with some world made burden android on our the connectivity. that Also, which are and Google predicting older effort. more is pairing our of lot X, new deployable, because changes in deploying maintaining Bluetooth android

All behind that now of is us.

Brian Swift

Okay.

mean, really there's guys? had rifle down -- there's turned shattering before, that all something earth certainly So, issues nothing you've nothing for introduced you those that I you so about the

Kevin Mills

a Well, number of of them. we've some for I addressed concerns think that

people it that think not when number be the people of we causes robust successful. than it's make little deployments more new address concerns. And addressed have not would've that concerns they system, to deploy I their those that stuff had been to much certainly a we had

Brian Swift

Okay.

innovation, your more things assume I So, of those types is much compatible now?

Kevin Mills

App things Yeah, think deploy. for we lot broken, get mode. mean things replacement. is making deployed once been improved right the we've the a confused. how for so -- the the have is whatever and We're adding like yeah, it I don't drop always side, Users can the as on on support scanner to mean, stand a scanner, get -- are it I Companion you on you compatible because I in they compatible. But what easy them to We've added get reason

being things more All those that addressed than are deployable previously. we of so are been we've

Brian Swift

Okay. Thanks.

Kevin Mills

Brian. Thanks,

Operator

over further this at we And questions call Mills, time. no turn I'll to and CEO. have the back President Kevin

Kevin Mills

Thank you, afternoon. wish good for just today's finish all you. to participating and a by you Thank thanking everyone call like in operator. I

Operator

you, ladies concludes you Thank for participating. This Thank and conference. today's gentlemen.

may You disconnect. now

Socket Mobile (SCKT) 24 Apr 192019 Q1 Earnings call transcript