Data I/O Corporation

And welcome to the Data.io fourth quarter 2023 financial results conference call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Jordan Darrow, Investor Relations. Please go ahead.

Thank you, operator, and welcome to the Data.io Corporation fourth quarter 2023 financial results conference call. With me today are the company's president and CEO, Anthony Ambrose, and Chief Financial Officer, Jerry Ng. Before we begin, I'd like to remind you of the statements made in this conference call concerning future revenues, results from operations, financial position, markets, economic conditions, supply chain expectations, estimated impact of tax and other regulatory 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 on global and geopolitical events, international trade regulations, order levels 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, including those described from time to time in the company's filings on Forms 10-K and 10-Q with its 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 over the call to Anthony Ambrose, President and CEO of Gait.io.

Well, thank you very much, Jordan, and welcome everyone. I will begin my formal remarks by addressing our 2023 financial and operational performance, and then I'll turn the call over to Jerry Eng, our CFO, for a more detailed look at the numbers. We delivered very strong financial performance in 2023 with a 16% growth in revenue and a return to profitability. We also experienced encouraging business momentum, which has carried over into 2024. A quick summary of 2023 shows that our top line grew 16%. The automotive market represented over 63% of our bookings in 2023. We had over 23 new customer wins in 2023, and that was worldwide and across all segments. This marks our third year in a row with over 20 new customers. and many of those were marquee wins in automotive locations globally during the year. Our PSV platform for programming is the most successful platform in the industry and now has over 485 deployments worldwide. Centrix, our secure provisioning deployment platform, grew 150% in software and pay-per-use revenue in 2023 versus 2022. Gross margins for the year were nearly 58%, in line with our mid to upper 50s guidance on gross margin for the year. Inventories declined nearly $900,000 as we unwound our COVID-era supply chain strategies. And cash grew about $830K for the year, reflecting operating profitability, inventory reductions, and spending controls. Finally, pointing to our strong operating leverage, we delivered increased profits, with adjusted EBITDA increasing to $2.3 million for the year, up over $1 million from the prior year. and net income was positive, as I mentioned earlier. 2023 was an interesting year. Our global reach proved very positive for the years we had excellent growth in the Americas region, as well as Asian region outside of China. In Japan, we're pleased with our new partnership launched in the first part of the year with NOAA leading company to establish the first centric security provisioning service in Japan. as well as a separate collaboration we formed with Nuvaton Technology to support their latest generation of IoT microcontroller products with our Centrix platform. As I mentioned earlier, Centrix overall grew our software and pay-per-use revenue 150% in the year. And I mentioned earlier that solar was one of the new markets we tapped into in 2023, as well as multiple customers coming into production. Today, especially, AI is top of news these days for very good reasons. And people continue to ask us, you know, how does AI impact data I.O. markets? Well, AI plays into our business in a couple of ways. First, the AI platforms need strong hardware-based roots of trust to ensure data sets that for machine learning, training, and other learning are accurate and that their software is secured. This is a use case we have talked about with a customer of ours. securing an AI accelerator card for the hypercloud. We also see AI coming into play in the automotive space as we see more autonomous driving applications and other use cases as automotive electronics become more sophisticated and more centralized. In 2024, in addition to these markets, our focus will be on what we call disciplined growth. We'll continue to target the automotive, industrial, and programming center markets worldwide, and we'll be adding to that the spending discipline and focus that Jerry's brought in in the second half of 2023. For growth, automotive electronics at 63% of our business is foundational for us moving forward. As we've said multiple times on multiple calls, we have applications driving the increase in semiconductor content continuously. These include advanced driver assist systems or active safety, in-vehicle infotainment, electrification, connectivity, and security. We continue to see strong growth worldwide. And even though we are a dominant supplier in automotive, people ask us, how can you continue to grow in automotive if you have 18 of the top 20 customers? Well, we continue to win new customers as new entrants come into the market. We continue to win new sites as existing customers expand new factories worldwide. And we continue to win with new technologies as current and new customers expand their use of UFS flash memory in all applications that I mentioned earlier. So we see continued momentum in automotive going into 2024 and across the board, not only in automotive, but industrial and programming centers, Our sales funnel has added significant opportunities in the past quarter is at its highest level in several years. This is the basis for our positive outlook for the year. Second is people continue to be a big asset for data IO. Our global team did an amazing job navigating through the COVID closures, supply chain disruptions, and inflation spikes that we've had to deal with over the past several years. We believe those are largely behind us. We continue to keep our great team and add to it. As you may recall, Jerry Yang was appointed our CFO during the third quarter of last year, and he's now really putting a stamp on the company. I have specifically asked Jerry to focus on tighter spending controls, process efficiencies, and operating leverage, as improvements here will turbocharge our financial performance as we grow the company's top-line revenues. I'll reiterate what we provided in our earnings release regarding 2024 expectations. Based on continued strength amid a stable global operating environment, we expect double-digit bookings growth in 2024. Gross margins are expected to be in the mid to high 50% range for the year. Operating expenses for 2024 are expected to be consistent with or moderately lower than operating expenses in 2023, excluding incentive comps, sales commissions, and currency. The combination of spending control and top-line growth is an exciting combination for us in 2024. Before I turn it over to Jerry for his commentary, I'd like to invite investors and other interested parties to listen to our recent fireside chat interviews. Late last month, we launched an interview where our CTO Rajiv Gulati and I were hosted by small-cap investor and Data.io shareholder Vishal Mishra of BART Associates on the topic of AI programming and security requirements. Next week, we'll launch an interview based hosted by semiconductor senior equity research analyst David Williams of Benchmark Company. We talk about semiconductor programming growth opportunities in general. Also, in April, we invite you to join us at the annual industry trade show Apex Expo in Anaheim, California. If you're in the area, please contact Jordan Darrow if you'd like to attend as our guest. With that, I'll turn it over to Jerry Eng.