SCKT - Earnings call transcript Q4 2019

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Operator

Hello and welcome to the Q4 2019 Management Conference Call. My name is Johnny, and I'll be the operator for today's call. On today’s call we have Kevin Mills, Socket Mobile’s CEO and Lynn Zhao, Socket Mobile’s CFO.

Before we begin, we'd like to remind everyone that this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934.

As amended, such forward-looking statements include, but are not limited to, statements regarding mobile data collection and mobile data collection products, including details on timing, distribution and market acceptance of products and statements predicting the trends, sales and market practice and opportunities in the markets in which Socket Mobile sells its products.

including, and results in actual statements happen in vertical anticipated a may of risks materially may because distribute as described involve of products Form markets as of or doing choose successful so; and number Exchange filed reports the acceptance the current be acceptance well of from the and in the not XX-K factors, application happen to Socket's anticipated; statements in the uncertainties, not Securities Commission. not may products Socket application results may and as recent differ of sales as risk Such opportunities and that risk market Mobile's may not XX-Q partners the with such channels Socket's forward-looking anticipated; most risks other distribution

to session. any a are such not being question-and-answer a later obligation statements. does mode, that note recorded. participants listen-only update Socket all this in conference this At [Operator Please any is Instructions] conduct time will undertake forward-looking we

Socket will And Mills, to Kevin may CEO. Kevin, call you over I turn begin. the now Mobile’s

Kevin Mills

Thank joining us you you, everyone, for Good Johnny. thank today. afternoon, and

of increase Our million revenue $XX.X XXXX XX% million. an was our over revenue XXXX $XX.X of

$XXX,XXX $X.XX per income slightly net a per XXXX. improved XXXX net profit of XXXX before net Earnings of resulted of a on better tax per for XXXX. based $X.XX $XXX,XXX combined Our in share revenue in compared with loss loss operating for margins share gross net operating share compared in to to

levels profitable able year to XXXX we to and quarter. each turnaround were was the in operating we expected return

it able improvements grow overview of back there still and to we see for the to at where easy look following is we opportunities the business. the like where is entire I'd provide and year As were

at in different segment. segments targeted each Socket and has families Mobile operates market market product two

system based used indoor providers are Our a in variety colors of iPad SocketScan family by centric of applications. products point-of-sale primarily and which come other

by SocketScan product like of of products Square few. lost ShopKeep, XXXX, in driven and the products represented partners transitions our family family XX%, the a all grew the recovered In Shopify, we XX% ground SocketScan XXXX, name during the XXXX. of In revenue and to

growth category. to expect very this Shopify strength in continued others. see we have market by in We category XXXX share We of driven believe this in substantial and already increasing

family and ruggedized products DuraScan and targeted are Our customers. their outdoor and and revenue our about XXXX of only of DuraScan In X%. products weatherproof industrial grew at commercial XX% at applications primarily family but the of warehousing associated represented

family would that When designed believe more deployment harsh we requirements DuraScan tumbles for originally the that a be of to conditions. XXX environmental withstand solution to meet concrete the device in market sufficient products, a robust than we for could weatherproof

robust. world that have was feedback, times discovered which level five However, we family and DuraScan drops real we products this the redesigned the insufficient on is more customers of a day, often in of them units and every drop the days. durability made retooled Based to substantially XXX and we XXX four

improved significantly In to able much we'll January, added this new addition, the launched and of grow XXXX upgradeable We sealed portion now believe XXXX. be them. and versions we our requested We shipping option. business battery are in in

Unlike deployed X, type which for the deployments modest XXXX, made by to delivery years. is revenue business, X%. much XXXX iPhone Our with solution most X. used on grew products were purchases, as solution iPhone sled-based five to the an unit XX% be to handed inspection based our single typically designed still workers is of of the driven This solutions three single DuraSled In and is Samsung to Scanners our of deployed tend remaining and X combined or phone. DuraSled or other and be the family Attachable a up a at or

which number based Socket this solution single-handed had already into a entry of was established late a market, players.

incumbents. While we to did grow the the progress against make was it business, difficult substantial

we and offering In through the the iPhone upgraded support believe from we only iPhone the which range are a solution complete currently We stronger be significantly iPhone a our XXXX, In solutions, supports like. to company XX. iPhone of X XXXX, player. we’ll

complete revenue. support for if especially new a workers. to be option need We phones, we’ll have deployments for New believe application bring-your-own-device customers, now and providers these able solution grow and our both a provides associated and product the offering we their old to

return year, good where would turnaround revenue, summarize and growth. further as I repositioned product families our we profitability for grew XXXX to So a scanning our

also to products to invest We the the Reader/Writer. SXXX, bring we and new development our as so such Membership could continue market Card in new research

as like to expect others. Shopify, our products, and scanning with look strong Square partners of XXXX, So we being see by to growth by driven driven we point our ahead of family sale continued our products SocketScan

with on significantly products to design We completed. better the have DuraScan do we our improvements of expect based family

iPhone in DuraSled XX our expect X leadership on based grow We based products markets. iPhone the and the to position

In well traction expect in and for RFID a Apple wallet Google mobile Membership addition, numerous Reader/Writer, read we and that device to our as both Contactless Card passes cards. as our launch SXXX, can gain and NFC

be products has the identify will the expect as second easily of we customers view the loyalty half to see take one to on based like ever any retail have of SXXX and phone. their enable don't significant most offer the until developed. points merchants While of we as tap SXXX we written. to Products revenue to XXXX, software It time

to excited SXXX product our the significant a particularly long-term revenue goals. existing see we as We this base. contributor new retail bringing customer to We our are that are

XXXX will a solid in be with summarize, for year growth, we QX. to believe Mobile and QX So Socket good especially revenue

the of we rolls continue we also to DuraSled be as year see partners, to by growth the sale products point mobile strong both of and driven in As DuraScan strong out. our expect family

call that our Lynn I’ll turn With Zhao. the now said, CFO, over to

Lynn Zhao

Revenue tax XXXX XXXX for million. fourth gross Revenue of before $X.X was XX.X%, $X.X of the before operating $X.X of of of a with quarter expenses in million, with Kevin. tax was XX.X%, gross of expenses loss you, net the $X.X margins net of million, fourth income the of and margins operating quarter income the million the million. million and $X.X $X.X Thank

$X.XX Net XXXX income after of quarter million XXXX was share. tax $X.X $X.X per to of or compared fourth million for for the net the share fourth loss quarter $X.XX or per of a

from tax before million tax was in million XXXX. for income $X.X carryforwards net $X.X and state paid the We in to operating a of taxes loss continue to benefit Net before XXXX and net loss XXXX. zero federal compared

and increased million option required cash for The income expenses income which by operating we non-cash was and stock taxable payment. XXXX loss no our carryforward recorded net tax, the they $X.X sheltered

million operating federal Our $XX.X carryforwards $XX tax approximately and December million of state net remaining XX, at XXXX, loss income for expected tax. future are shelter for to

improved cash flow a Our of result the has as profitable growth.

Our cash of balance to December included at at million million December sheet XX, $X.X XX, XXXX, XXXX. $X.X compared

The In to paid down the XX, at X.X at December current compared $XX.X at term million from ratio at December $X.X XXXX XXXX. to by we assets December XX, XX, compared XX, was of of XXXX divided X.X was December Shareholders’ million XXXX. XXXX. $XX.X December current XXXX, a to equity loan XX, XX, current liability XXXX at as ratio, $X.X million current million December

our facilities January revolving maturity date In early XX, bank extended with and January, XXXX. renewed we’ve the the credit to

to credit Our profitability and growth. need the provide capital working facilities will we support future

Johnny? Now your call for over turn questions. I will the to operator the

Operator

Thank you.

our first Instructions] now And begin [Operator question-and-answer Troy. question session. the will We Alan from is

Kevin Mills

Hello.

Unidentified Analyst

Kevin. Hi, you How doing?

Kevin Mills

Alan. Good,

You?

Unidentified Analyst

of sounds a turnaround you also it's a have firm good to good. Thanks. year. Okay, know plans be that It with any with very nice the hired going the and Very for XXXX, to going Do a and Socket – any forward to plans you happy community the far profitability, your as XXXX. revenues at year, increased so do on positive investment see PR expose have guidance impressed you’ve scale? like a to I'm I end

Kevin Mills

of telling delivered. significantly and profitable to the than on to when investment I a think continue to having is Obviously, XXXX as Yes, we’ll story community. story around easier turning were out the opposed reach the we back promising the of telling

scanners lot them, see if share we to But, Obviously, some a our So, plan continue doing provide and to our the to value. of to in the Shopify, to yes, customers who of story the right? like our outreach. we we'll benefits see the reflected get want with is was associated as more exercise, of part markets we yes, very continue and tell well can in

Unidentified Analyst

That's people. mentioned to Is that and you're post hiring Facebook also more now? additional people that great. saw a you're technical salespeople looking I hire on you

Kevin Mills

our business hire so we the feel over a position add think hire. few I Yes, much We've I to last been, we would in as optimizing we that to that I continue say, to revenue. opportunity continue again, and years the we we're stronger see mean, model

we the yes, marketing to hire, as areas. particularly continue So, in as software digital well in will

Unidentified Analyst

Okay.

Okay. Thanks a lot.

Kevin Mills

Thank you.

Operator

call next Our from Swanson. is Steve

Unidentified Analyst

had. afternoon. couple I of Good questions a Kevin, Hey,

it of SXXX to scanners a XX? actually The Is how the one shipped Is many have was X,XXX? XX? how of first – SXXX the we it developers? much it Is

Kevin Mills

number I less no, say, a than would No, XX.

to call all the I working be have the sure make the XX working all do probably we're product developers. meet hardware you with with think So technical that of really We stage the we'd where the us engage what still been at to before has highly will developers requirements. have

today's software these that And phase. of drive In the in write still would the sales. unless world, the into hardware some We're programs and them wants is nobody to end complete. of much words put development very

good we Apple Google payment say, still, we’re have all hundreds, number And partners, in that, the And with range. have and new. I wallet parameters think for would addition, cetera. we would of associated technical customers very the demand drive In a any et I is which the all lot describe systems, once based could be understanding but that several I would the what XX of of as VAS those

we’re some gives at. scale where that you So of

Unidentified Analyst

this, it's some like fourth was early announcement of ready days quarter is so curious, anything. you – driver It's you've start might something not, of that's And was Yes, more the that maybe of been apparently thanks. available selling a doesn't this sound XXXX I kind these. of a device was for, have of made but and developers. been this people to realize when an XXXX kind clamoring I just

for feedback. those thanks actually that. appreciate than so less folks or hands, in I Thanks Around their the XX have got So XX

high had I in to or Next $X.X is inventory. that we million fourth It million. that from went built question of looks we end $X.X around up went about quarter that We was surprised end the the – XX%. planned a little to like I that by from about third quarter of Was inventory. inventory was up

Kevin Mills

bring we Well, it's did are from a products we do bit shipping more more a We – combination. so and some in inventory. have sea, additional by

is other inventory we The fulfillment online where do places that's shops. at have Amazon, now ourselves like happening from that thing our can we do

think So I the has to combination the added inventory.

comfortable with we're that. So

and seem world, sea distribution supply an our is standard bit typically lower. bad and distribution – rather Even that not to because by due thing $X in number is thing, higher sheet, having here though in But, yes, books, an especially little more Certainly, was to say, good today's, would probably that our inventory a it's not shipping a we of basis. inventory more has a a that ongoing be because fallen bit would a but much little issue balance probably in on than our the on million we on bit supply I keep cost had more is constraints less.

Unidentified Analyst

I loan having this do do money hanging we've extra we'll in for have right, with that All cash year. had, I have saving we question it, that what like to plan loan we'll wondering this what term around I'm sometime anything? thanks. and with plan looks we by middle thereafter is pay-off Okay. the the of we're And now our last And wondering paid guess to the I'm if off

Kevin Mills

we have plan. a Well, will certainly

back cash Basically markets. back in we'd I we've start as in as the that the think public when think can XX% of generate we certainly some this cash. last year few buffer, we which years. we cash we amount bought to a company will have from And over used and on have XXXX plan our the of I not like generate be reserves as of a to XXXX lean good we been

Unidentified Analyst

Okay. to stock I not in planning buybacks we are XXXX. assume any make

Kevin Mills

current fair – have is That a back That assumption. any buy is we plans no stock. to

… think I

Unidentified Analyst

so don't I don't that in of do that move that. I glad appreciate I'm a we and that wise doing we and did I XXXX. hear that think to not that's or hope any envision see

get back that. appreciate queue you. then. Thank I in the I'll Okay.

Kevin Mills

thing to Pay me use to that with passes. iOS so to add prior let Apple. of one one SXXX question opened the on to it XX, possible for the the maybe the just XX. of understand we're important with that mechanism doing was Yes, is were of iOS not iOS the things Because is within the things that SXXX, exclusive an Apple you could prior to up XX Apple iPhone types various have many

even though we any early substantial we the see in that's half. And in but So market, market don't feel locked going you'll have revenue very will forward. think it I the until a be why we're think on second this still SXXX, a I

Unidentified Analyst

you. Okay. Appreciate Kevin. that, Thank

Kevin Mills

you. Thank

Operator

Lines. from is question next our right, Allan All

Unidentified Analyst

this as far was very revenue because how that was of versus foreign quarter shape but heavy Japan, is much American? last Hi. up Lynn. I you how A as Good afternoon, concerned, know Can questions. quarter? it this quarter couple did Kevin,

Kevin Mills

to I normal. We annual would some were in we because say I said back more that X% that additional days it Europe. really additional we it's QX international because get call did an relative lines were along think did I XX%, QX had the XX% and and on the revenue annual happen. an we We – XX% QX, international But weak they was was from basis basis, those the QX. have international. on X% would because of to extended and also in might and didn't XX%, Japan to Japan of say domestic probably on we last in

Unidentified Analyst

As weakness fourth weakness as the business caused you that do you says how see you remember some forward? I quarter. mentioned in were small path maybe to what read was some, in looking there far quarter last that what you for, not were a seeing subsided purchases, And that

Kevin Mills

I people of don't to have do the cash to based be sale January stuff that because we've We of the some Well, the December in other months time. That's think and of surveys point we that business. on more mobile relative generally year weakest of and done. expect portion generally apply period color the registers

elements year our afterwards So now and XX%, as this during point to time. think in afterwards. of the I be the will we I certainly not less have up a of to sold to businesses understand are of business. that in about true December trend think as We that overall that that's we'd small the conjunction It's at And busy same XX% sale lose of sale sometime continue. of scanners of system certainly point with percent, and fall continues the January time a And seasonality. tend other an out and

seeing typically what I do seen in describe week strength as have better we January a February. and We expect are would and much a

rolling as are things expect. think I So out we

Unidentified Analyst

along? is by coming that talk you about little How the Could implementation marketing a bit Delfin?

Kevin Mills

mean, to recognition. struggle think I that okay. get I It's still we

membership I had outreached recognized a based retail and exciting. from reader to the this. made bigger more and new because retail in card magazines And they've we've on think interest and it's we've organizations get effort and

stock. having is And turn that to people I continue market would new an some in in the the with will think think the get the in I I associated And and to and of that initiatives. basically to, lead digital company these say space plan interest

and story XXXX tell I hard to the we'll week of was do to it's in And that. think AA easier the story strong XXXX. in an work a as off back coming certainly not now

Unidentified Analyst

I pursuing know. James still marketing replace Lopez. Okay. person you Are our to

Kevin Mills

person It to area. struggled who be we focus at that the the with starting I'm were that report happy Director and but Marketing person, XXXX. a as for board time have this new Digital us on person So will Yes, of end we've took of month. a be will happy to this right the find big

Unidentified Analyst

right. All

I could happen, revenue you, growth XX% in think talk to you least you to and obviously Do at mean you're to yet? question. could improve about – it unreasonable talk going profit. about it expect is not the it XXXX Okay. a guess, I going The and revenue last that's or that

Kevin Mills

I our current type those that that of I be, I think think think in. and would we are the as would we target, can be momentum maintain a like we ranges to

think to I'd the but happier be have I So, middle about talk things of us when certain happened. year Right.

but – are those I expectations. So, I don't think unrealistic

Unidentified Analyst

Okay.

you. Well Okay. thank

XXXX. to Looking a forward, much to improved

Kevin Mills

Thank you.

Operator

it questions. Instructions] we at this not further time any And look this we At like [Operator time. don't have have further any does questions

Kevin Mills

in to good participating like for all just afternoon. to everyone you. you I'd Thank So wish today's and call thank

Kevin Mills	Chief Executive Officer
Lynn Zhao	Chief Financial Officer

Socket Mobile (SCKT) 12 Feb 202019 Q4 Earnings call transcript