Data I/O Corporation

Good afternoon and welcome to the Data I.O. Third Quarter 2022 Financial Results Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions, and please note that this event is being recorded. I would now like to turn the conference over to Jordan Darrow, Investor Relations. Please go ahead, sir.

Thank you, Operator, and welcome to the Data I.O. Corporation Third Quarter 2022 Financial Results Conference Call. With me today are Anthony Ambrose, President and CEO of Data.io Corporation, and Joel Hatlin, Chief Operating Officer and Chief Financial Officer of Data.io. Before we begin, I'd like to remind you that statements made in this conference call concerning COVID-19, future revenues, results from operations, financial position, markets, economic conditions, Silicon chip shortages, supply chain expectations, estimated impact of tax reform, product releases, New industry partnership and any other statements that may be construed as a prediction of future performance or events are forward-looking statements which involve known and unknown risks, uncertainties, and other factors which may cause actual results to differ materially from those expressed or implied by such statements. These factors include uncertainties as to the impact of COVID-19, including the 2022 outbreaks in China, the Russian war with Ukraine, including any related international trade restrictions, along with continued reopening and recovery efforts within the developing global supply chain, and among our customer base, level of orders for the company and the activity level of the automotive and semiconductor industry overall, ability to record revenues based on the timing of product deliveries and installations, market acceptance of new products, changes in economic conditions and market demand, Part shortages, pricing, and other activities by competitors and other risks included those described from time to time in the company's filings on forms 10-K and 10-Q with the Securities and Exchange Commission, press releases, and other communications. The accuracy and completeness of forward-looking statements should not be unduly relied upon. Data.io is under no duty to update any of these forward-looking statements. And now I would like to turn the call over to Anthony Ambrose, President and CEO of Data.io.

Well, thank you very much, Jordan. I'd like to begin my formal remarks by addressing our 2022 third quarter financial and operational performance. And then I will turn over the call to Joel Hatlin for a more detailed look at the numbers. Our performance in the third quarter was outstanding as we delivered across the board with strong bookings, strong revenue, strong operating income, and strong cash generation. The second quarter call we predicted an end to the operational disruptions from the China COVID lockdowns and resumption of strong growth in Q3. And this is exactly what happened. Our team excelled in managing our global manufacturing capacity, silicon shortages, freight challenges, as we delivered 16 PSV systems to customers in the quarter and shipped a record unit and dollar volume of adapters to customers as well. We also have a large industrial-centric customer going into production in Asia during the quarter. In addition to a strong operating quarter, we had an excellent sales quarter. with third quarter bookings of $7.1 million reaching the highest level in the past year. Within the verticals, we had a strong automotive quarter, continuing our strength for the year. Automotive electronics represents 63% of orders so far this year, and we had four new customer wins in automotive and industrial during Q3. For those keeping score, that's 16 new customer wins this year alone. We're the market leader, and we're adding to our share. Our sales funnel in the third quarter continued the momentum for the first half of the year. New opportunities from automotive and industrial customers are driving our high level of demand. Activity within Asia and America has been strongest year to date, and Europe had a very strong Q3 as well. This is in spite of currency weakness for the euro and the yuan, high inflation and interest rates, and the war in Ukraine. These overall trends on demand reinforce our long-term view of a tripling of the automotive semiconductor market by 2030, with automotive memory growing at an even faster rate. Supporting our focus on the automotive memory market, earlier this month we announced significant improvements on the Luminex programming platform for automotive-grade UFS memory with our VerifyBoost technology. Verify Boost delivers verified performance up to 750 megabytes per second on high-speed gear 3 by 2 lane support for UFS 3.1 devices. And this enables customers to leverage existing production capacity for significant throughput gains while reducing their overall total cost of programming. Luminex programmers within our PSC programming systems deliver up to 4.5 times improvement in programming performance and reduce the total cost of programming by up to 39% while using VerifyBoost. This technology is now available in new systems as well as upgrades to any of our over 400 and growing PSV5000 and PSV7000 systems in the field. This technology announcement, our semiconductor partner Micron states that UFS is experiencing rapid deployment growth in automotive, consumer and industrial applications with significantly more volume expected in the coming years as UFS becomes the automotive standard in new systems. This view is shared by other leading suppliers of automotive memory as well, and DataIO is extremely well positioned to take advantage of this transition. VerifyBoost also illustrates the benefit of our continuous investment policy. We invest through good times and bad, through the downturn, through supply disruptions, through COVID lockdowns, so that we can deliver great technology to the market at precisely the right time. Centrix is another important programming platform for data I.O. where we continue to innovate. We think we're headed towards a golden age as security becomes ever more demanded and ever easier to implement across industrial, I.O.T., and automotive markets. We had a large OEM customer go into production in Asia recently, and we're working on a number of interesting deals that I hope to discuss more in our next call. Shifting bases a bit, as I've discussed through the year, we're celebrating our 50th anniversary as a company. One of the activities we've been involved in as part of the celebration is a series of interviews that we've called fireside chats. During the third quarter, we conducted three fireside chat interviews. It's been a lot of fun personally, and we're getting tremendous feedback from both the investment community and from our industry partners. The primary objective of these interviews is to inform and articulate a vision for what we are doing as well as where we see things going for the industry long-term. Topics of our sessions in the third quarter included, number one, the future of semiconductors for automotive and electronics with guest host Suji Da Silva, the semiconductor equity research analyst at Roth Capital. Second topic was managing a resilient supply chain with guest host Gene Inger of the Inger Newsletter. And third, the future of security which we see through the lens of our Centrix deployment platform, and this was conducted with guest host Avi Fisher of Longcast Advisors. Earlier this month, we uploaded our most recent interview, which was on Industry 4.0 and why everything else needs to be connected, with guest host Vishal Mishra of Mishra Capital Partners. I should point out that Mishra Capital and Longcast Advisors are shareholders of Data.io. We're grateful to all of our hosts for participating in those series of interviews, and hope all of you are watching, whether on our website or through our social media channels. Based on our backlog and order flow, our continued operation is running well. We're expecting a good quarter in Q4, and it's an exciting time for us here at DataIO. With that, I'll turn it over to Joel Hadlam.