Socket Mobile, Inc. (NASDAQ:SCKT) Q1 2025 Earnings Call Transcript

Socket Mobile, Inc. (NASDAQ:SCKT) Q1 2025 Earnings Call Transcript April 24, 2025

Operator: Welcome to Socket Mobile, Inc.’s Q1 2025 Earnings Call. My name is Paul, and I will be your operator for today’s call. Before we begin, I’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 conditions and opportunities in the markets in which Socket Mobile sells its products.

Such statements involve risks and uncertainties, and actual results could differ materially from the results anticipated in such forward-looking statements because of a number of factors, including, but not limited to, the risk that manufacturer of Socket’s products may be delayed or not rolled out as predicted due to technological, market, or financial factors, including the availability of product components and necessary working capital, the risk that market acceptance and sales opportunities may not happen as anticipated, the risk that Socket’s application partners and current distribution channels may choose not to distribute the products or may not be successful in doing so, the risk that acceptance of Socket’s products in vertical application markets may not happen as anticipated, as well as other risks described in Socket’s most recent Form 10-K and 10-Q reports filed with the Securities and Exchange Commission.

Socket does not undertake any obligation to update any such forward-looking statements. On the call with me today are Kevin Mills, Chief Executive Officer; Dave Holmes, Chief Business Officer; and Lynn Zhao, Chief Financial Officer. I will now turn the call over to Kevin Mills. Kevin, you may begin.

Kevin Mills: Thank you, operator. Good afternoon, everyone, and thank you for joining us today. Our revenue for Q1 was $4 million, a decrease of 20% over Q1 2024. We recorded margins of 50.4%, a slight decrease from the 51% margins in Q1 2024. Our operating loss was $900,000 compared to an operating loss of $500,000 in Q1 2024. Overall, Q1 was a difficult start to the year. Revenue came in lower than expected as we saw weakness in both our domestic and international businesses. While it’s impossible to know for sure, we feel the level of uncertainty froze a lot of deployments and routine business during Q1, resulting in lower revenues. The positive news from the quarter was that we saw the first green shoots in the industrial portion of our business, which Dave will detail in a few moments.

As regards the outlook, the tariff situation has greatly complicated everyone’s lives. Socket, like everyone else, has a very international supply chain. In broad terms, we source about 30% of our materials from Mexico, 20% from Taiwan, and about 10% from China. With the remaining 40% sourced in the U.S. So, the tariffs do impact us. We are working with our customers to minimize the impact as much as possible, especially with our international customers. From our customers’ point of view, we are a component of their solution and, therefore, the strength of their business is dependent on other elements in their supply chain. And this is particularly true for our many retail customers. So, we expect retail to remain at current levels until there is more certainty and people can make and execute plans.

Q&A Session

Thankfully, we expect most of the near-term industrial business to be in the U.S. and less likely to be impacted by the tariffs. So, overall, we believe we will be able to continue to invest in our business and achieve positive EBITDA results for Q2, and believe we will be able to achieve profitable operating levels for the second half of the year. And, now, I’d like to turn the call over to Dave, who will provide more details on our progress in the industrial segment. Dave?

Dave Holmes: Thank you, Kevin, and good afternoon, everyone. As Kevin said, today, I’d like to highlight a few of the significant milestones that we achieved in Q1. We’ve invested a lot into our expansion into the industrial scanning and handheld computing markets over the last 2 years. Those investments are starting to bear fruit in 2025. We’re seeing a lot of interest from a variety of customers in warehousing and logistics, manufacturing, mining, oil and gas, energy, and construction. Widespread testing is underway, and we’ve received purchase orders for a long-term rollout from a Fortune 50 Tier 1 industrial customer. The ruggedized scanning market is large, and our entry into this space will help us diversify our business beyond retail.

We also recently announced the launch of the Xtreme iXG and iXS Series, powered by iOS and featuring a fully integrated iPhone 16e. These devices are designed to serve as full-featured handheld computers, combining high-performance long-range barcode scanning with a connectivity, app ecosystem, and user-friendly interface of the iOS platform. Together, these capabilities allow frontline workers to capture data more accurately, respond more decisively, and perform critical tasks with greater speed and confidence. These products put Socket Mobile into the $27 billion mobile handheld computing market. Our XtremeScan product is comprised of three different configurations, XtremeScan Case, XtremeScan, and XtremeScan Grip, all designed for iPhone.

And, now, we’re offering models with iPhone 16e inside. XtremeScan is designed to enable iPhones to withstand harsh industrial conditions, offering robust scanning capabilities and military-grade durability. This opens the door to new customer segments that demand the ultimate performance in the most difficult environments. Beyond new products, we’re also seeing our investments in our customer and developer experience having an impact with our partners. Alfred, our AI-powered developer support assistant, is helping our developers around the world with multilingual support to integrate our CaptureSDK into their apps, so they can enable best-in-class scanning capabilities into their mobile platforms. Our new product and technology investments will extend our reach and diversify our customer base.

Ultimately, this will make us more sustainable and less dependent on retail, as we become a more complete data capture company. With that, I’ll turn it over to Lynn for more details on our financial results. Lynn?

Lynn Zhao: Thanks, Dave. Good afternoon, everyone. Thank you for joining today’s call. Revenue in Q1 decreased 20% year-over-year to $4 million from $5 million in the prior year quarter and decreased 18% sequentially from $4.8 million in Q4 2024. Gross margin for Q1 was 50.4% compared to 50.3% in Q1 2024, and 51% in Q4 2024. Operating expenses for Q1 were $2.9 million compared to $3 million year-over-year and $2.9 million in the preceding quarter. We recorded a Q1 operating loss of $0.9 million compared to $2.5 million loss in Q1 2024 and the $0.4 million loss in the preceding quarter. Q1 adjusted EBITDA loss was $485,000 compared to a positive EBITDA of $40,000 in Q1 2024 and $140,000 in Q4 2024. Diluted loss per share in Q1 was $0.13 compared to $0.07 in Q1 2024.

Turning to our balance sheet. We ended Q1 with a cash balance of $1.7 million. Cash outflows included $700,000 for operations and $50,000 in capital expenditure. As of March 31st, our inventory level net of reserves stood at $5.3 million compared to $5 million at the end of 2024. On April 21st, we renewed our $3 million domestic bank credit line, which will now mature in April 2026. This line allows us to draw up to 80% of our domestic accounts receivable if needed. Currently, there are no outstanding draws. This wraps up our prepared remarks. Now, I will hand the call over to the operator for questions. Operator?

Q -:

Operator: [Operator Instructions] And it appears we have no questions at this time. I will turn the call back over to your host for any closing remarks.

Kevin Mills: Thank you, operator. So, thank you for participating in today’s call and I wish you all a good afternoon. Thank you and goodbye.

Operator: This concludes today’s conference call. Thank you for attending.