Socket Mobile Inc. (SCKT), a leading provider of mobile data collection and barcode scanning solutions, reported a stable second-quarter revenue of $5.1 million in 2024, marking a slight decrease of 0.7% from the same period in the previous year. The company's financial performance was revealed during its Q2 2024 earnings call, in which it also discussed the launch and positive reception of its new products despite a tough economic environment. Socket Mobile's CEO Kevin Mills and other executives provided updates on the company's strategic initiatives and financial health.
Key Takeaways
- Socket Mobile's Q2 2024 revenue remained steady at $5.1 million, a minimal decrease from Q2 2023.
- The company was EBITDA positive in Q2 2024, despite a challenging economic climate.
- New products launched in late 2023 and early 2024 have received positive feedback and are expected to contribute to future revenue.
- Socket Mobile's newer product lines include the XtremeScan industrial scanners and wearable devices, with the XG640 targeting the transportation and logistics markets.
- The company is making progress with SocketCam, its camera-based scanning technology, which is expected to generate a recurring revenue stream from software subscriptions.
Company Outlook
- Socket Mobile anticipates new products like XtremeScan and SocketCam to begin contributing significantly to revenue in Q4 2024 and into 2025.
- The company is transitioning towards a more diversified and sustainable business model, less dependent on retail, and expanding into the ruggedized mobile computing market.
Bearish Highlights
- The company recorded a net loss of $608,000 in Q2 2024, slightly greater than the net loss in the same quarter of the previous year.
- Operating expenses increased due to cost of living salary adjustments, contributing to the net loss.
Bullish Highlights
- Socket Mobile's gross margin remained strong at over 50%, with Q2 2024 at 50.9%.
- The company has successfully maintained its channel inventory level, which increased to $2.65 million in Q2.
- The reserve rate for returns decreased significantly, leading to an increase in revenue.
Misses
- EBITDA for Q2 2024 was breakeven at $8000, a decrease from $234,000 in Q2 2023.
- The cash balance decreased to $2.1 million at the end of Q2 from $2.8 million at the end of both 2023 and Q1 2024.
- Inventory was reduced from $5.4 million to $5.2 million, as the company managed its resources amidst economic pressures.
Q&A Highlights
- The Q&A session focused on the company's financial results and outlook, with executives addressing questions about product performance and strategic initiatives.
Socket Mobile's Q2 2024 earnings call reflected a company navigating a tough economic landscape with resilience and strategic focus. The introduction of new products and movement towards a diversified revenue stream, including recurring software subscriptions, positions Socket Mobile for potential growth in the forthcoming quarters. Despite a slight revenue decrease and a net loss, the company's commitment to innovation and market expansion suggests a forward-looking approach to overcoming current challenges.
InvestingPro Insights
Socket Mobile Inc. (SCKT) has been navigating a challenging economic environment, as reflected in its Q2 2024 performance. To provide a clearer picture of the company's financial health and future prospects, here are some insights based on real-time data from InvestingPro and InvestingPro Tips.
InvestingPro Data:
- The company's market capitalization stands at a modest $8.53 million, indicating a small-cap status which may appeal to niche investors or those looking for potential growth opportunities in the technology sector.
- With a negative P/E ratio of -5.73, Socket Mobile is not currently profitable, which aligns with the net loss reported in Q2 2024.
- However, the company's Price / Book ratio is at 0.45, which suggests that the stock is trading below its book value and could be considered undervalued by some investors.
InvestingPro Tips:
- Socket Mobile is trading at a low Price / Book multiple, which might attract value-oriented investors who are looking for assets that could be undervalued by the market.
- The company is quickly burning through cash, a critical factor that investors should consider, especially in light of the reported decrease in cash balance from Q1 to Q2 2024.
The InvestingPro platform offers additional insights and tips that could further inform investment decisions regarding Socket Mobile Inc. There are currently 4 more InvestingPro Tips available, which can be accessed at https://www.investing.com/pro/SCKT. These tips provide a deeper analysis of the company's financials, including cash flow concerns and dividend policies, which are particularly relevant given the company's current financial position and the strategic initiatives it is undertaking to drive future growth.
Full transcript - Socket Mobile (SCKT) Q2 2024:
Operator: Welcome to the Socket Mobile Inc. Q2 2024 Earnings Call. My name is Jen 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 collections 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 manufacture 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 Mills, you may begin.
Kevin Mills: Thank you, operator. Good afternoon everyone and thank you for joining us today. Our Q2 revenue was $5.1 million, a 0.7% decrease compared to $5.12 million from Q2 2023. [Technical Difficulty] in Q2 2023. In Q2 2024, we were EBITDA positive. Overall, Q2 was a difficult quarter in a challenging economic climate, while we were pleased with our operational performance during the quarter as we maintained our focus on promoting and demonstrating our newer products. We launched our newer products in late 2023 and early 2024 and initial deliveries have been made. Feedback has been very positive. [Technical Difficulty] to make a meaningful contribution to our revenue. I would now like to turn the call over to Dave Holmes who will provide a more detailed update on our progress. Dave?
Dave Holmes: Thank you, Kevin and good afternoon everyone. As Kevin said, today I'd like to talk about the progress we are making with our newer products and strategic initiatives and highlight a few of the significant milestones that we achieved in Q2. Our investments in innovation are helping transform Socket Mobile into a more comprehensive data capture company. We're seeing good traction with our XtremeScan military-grade industrial scanners as well as our wearable products. These products were built for the industrial barcode scanning market, facilitating the use of iPhones and iOS applications in rugged work environments. We recently announced our latest addition to the family, the XG640, specifically designed for the transportation and logistics markets. Our unique design was built for BYOD or bring your own device. Delivery drivers can use their own mobile device for communication, navigation or photos and instantly connect to XtremeScan to enable high-performance barcode scanning. We think it's perfect for small and medium-sized delivery operations, which often use independent drivers. Workers love it because they no longer have to carry multiple devices. These product families represent a significant milestone in our commitment to delivering high-quality data capture solutions for our customers in industrial, manufacturing, warehousing, transportation, energy and airports. XtremeScan is designed to enable iPhones to withstand harsh industrial conditions and offer robust scanning capabilities with the ultimate durability. Opens the door into new customer segments in the massive ruggedized computing space that demand the ultimate performance in the most difficult environments. In Q2, we saw several marquee customers putting these new products through rigorous testing. We passed some of the most intense testing with flying colors. Many of these customers are now moving into proof-of-concept and pilot projects to put the devices into the hands of their frontline workers. We expect to move into deployments later this year, and we expect these products to begin to contribute to our revenue in Q4 and into 2025. We've also made significant progress in promoting our camera-based scanning technology. Our early adopter app partners have integrated SocketCam into their platforms, enabling their customers to scan barcodes directly into their apps using the mobile device camera. The free subscription version of SocketCam enable our app partners to serve all their diverse end user needs from the most cost conscious with our free SocketCam C820, to a more feature-rich capture requirements with our subscription-based SocketCam C860. And the most intense users can still access our array of hardware handheld scanners. All of these are made available to our app partners' ecosystem with a single, simple and free integration of our CaptureSDK. As adoption builds and end users upgrade to SocketCam C860, this will generate a recurring revenue stream for us each month. Our new XtremeScan products will extend our reach and diversify our customer base and allow us to enter the large ruggedized mobile computing market. SocketCam opens the door for Socket Mobile to have a recurring revenue stream each month for software subscriptions. Ultimately, these initiatives will allow us to make, to become a more diversified, sustainable most dependent on retail. We are evolving into a more complete hardware and software data capture company. With that, I'll turn it over to Lynn for more details on our financial results. Lynn?
Lynn Zhao: Okay. Thanks, Dave. Thank you, everyone, for joining today's call. Our Q2 revenue was approximately $5.1 million, similar to the prior year quarter and the previous quarter. Our channel inventory level was at $2.65 million, increased from $2.1 million on March 31. The reserve rate for returns, however, decreased from 44% to 22.3%, resulting in an increase of $320,000 revenue during Q2. We have maintained our gross margin of over 50 points -- 50 points, yes. In Q2, our gross margin was 50.9% compared to 51.8% in the prior year's quarter and 50.3% in the preceding quarter. Operating expenses for Q2 totaled $3.1 million, a 6% increase compared to the same period last year and a 4% increase over the previous quarter. This rise is primarily attributed to cost of living salary adjustments implemented at the start of Q2. During Q2, we recorded a net loss of $608,000 or $0.08 per share compared to a net loss of $513,000 or $0.06 per share in Q2 2023 and a loss of $557,000 or $0.07 per share in Q1 2024. Similar to Q1, Q2 EBITDA was breakeven at $8000 compared to $234,000 in Q2 2023. Total non-cash expenses including depreciation, amortization and equity expenses are $543,000 in Q2 2024. Our cash balance decreased to $2.1 million at the end of Q2 from $2.8 million at the end of both 2023 and in Q1. Q2 spending includes $540,000 in operating activities and $110,000 in capital expenditures. We reduced our inventory from $5.4 million at the end of both 2023 and the Q1 to $5.2 million. This wraps up our prepared remarks. Now I will hand the call over to the operator for questions. Operator?
Operator:
Kevin Mills: Thank you, operator and thank you everyone for joining us today and wish you all a good afternoon. Goodbye.
Operator: And this concludes today's conference call. Thank you for attending.
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