Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Data I/O Corp (NASDAQ:DAIO) has implemented a consultative sales approach, reducing the sales cycle from 140 days to 70 days, indicating improved efficiency.
• The company has reduced operating expenses and continues to find opportunities to optimize spending, including deploying AI to streamline processes.
• Asia revenue grew by 14% for the year, showcasing strong performance in that region despite challenges in other markets.
• Recurring revenue, such as adapters and services, remains steady, representing 50% of the year's revenue and providing a stable base.
• The order backlog remains strong at $3.5 million, up $700,000 from the start of the year, which will contribute to future shipments and revenue.

Negative Points

• Fourth quarter revenue was down 25% from the prior period, and full-year sales were down 22% from 2023, indicating significant revenue challenges.
• The automotive electronics sector, a major part of DAIO's business, is facing uncertainty and limited customer capacity expansion, impacting system shipments.
• Gross margins decreased to 52% in Q4 and 53% for the full year, down from 58% in 2023, primarily due to lower sales volume.
• The company incurred a net loss of $1.2 million for Q4 and $3.1 million for the full year, compared to a net profit in 2023.
• The booking and revenue declines were most significant in the Americas and European markets, highlighting regional challenges.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Sign with DAIO.

Q: Can you confirm if the $625k of non-recurring expenses in Q4 will lead to a decline in SG&A and R&D expenses moving forward? A: Yes, those expenses are non-recurring, and we expect them not to occur in 2025. However, we will continue to evaluate our spending levels and potentially redeploy investments as needed. - Jerry, CFO

Q: Can you provide insights into the sales funnel and expectations for the year, considering the political changes in the US? A: The political environment and tariff wars have impacted growth perspectives, particularly in the automotive industry. However, we are focusing on expanding into other markets, such as service providers and contract manufacturers, to diversify and strengthen our sales funnel. Early indications show improvement, and Q1 is expected to be better than Q4. - Bill, CEO

Q: How are you managing the impact of tariffs, given your manufacturing presence in both the US and China? A: We are mitigating tariffs by leveraging our international footprint, optimizing supply chain logistics, and exploring duty recovery options. Additionally, we are considering moving some manufacturing out of China if necessary. - Jerry, CFO

Q: With the automotive market uncertainty, how are you expanding into other verticals, and is this translating into actual orders? A: We are seeing positive signals in the service provider segment, with a 20% increase in adapter activity. This indicates increased platform usage, which can lead to sales of automated systems. We are focusing on servicing this segment to capture more opportunities. - Bill, CEO

Q: How does the current political environment and tariff uncertainty compare in terms of impact on the automotive industry? A: Managing tariffs is more straightforward as we can take specific actions to mitigate their impact. However, the broader economic and market uncertainties, particularly in Europe and the Americas, pose a bigger challenge. - Jerry, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.