Socket Mobile, Inc.

Everyone, and welcome to SACHS Mobile Incorporated Q2 2025 earnings call. My name is Elvis, and I'll 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, mobile data collection products, including details on timing, distribution, and market acceptance of products, and statements predicting the trends, sales, market conditions, and opportunities in the markets in which SACHS 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 several factors, including, but not limited to, the risk that manufacturer of SACHS 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 SACHS application partners and current distribution channels may choose not to distribute products or may be unsuccessful in doing so, the risk of acceptance of SACHS products in vertical application markets may not happen as anticipated. As well as other risks described in SOCKIT, most recent formed 10K and 10Q reports filed with the Securities and Exchange Commission. SOCKIT 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 Lin Zhao, Chief Financial Officer. Now I'll turn the call over to Kevin Mills. Kevin, please go ahead.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us today. Our revenue for Q2 was $4 million, a decrease of 20% over Q2 2024. We recorded margins of 50%, a slight decrease from the margins of 51% in Q2 2024. Our operating loss was 700,000, compared to our operating loss of 500,000 in Q2 2024. Overall, Q2 was another difficult quarter. Revenue came in lower than expected, as we saw weakness in both our domestic and international businesses. Uncertainty in the business environment has resulted in the delay or postponement of numerous projects. In addition, the level of general deployment seems to have slowed across the board. On the positive side, we did deliver our first extreme scan products to a large industrial customer. And according to them, the deployment has been flawless, which is a very positive sign. Unfortunately, they have delayed a significant portion of the deployment to 2026. Dave will provide more color on the extreme scan progress opportunity in a few moments. As you believe the market will remain soft during the rest of 2025, we will have to continue to manage our expenses lightly. In Q2, our expenses were lower than in Q1, so we were able to record an evener loss of just over $100,000. Significantly better than the $481,000 evener loss recorded in Q1. We will control costs and sustain investments in research and development and Apple sales relative opportunities. Most of the Apple relative opportunities are significant, and even getting a few of them would have a significant long-term benefit. We understand that this will strain our resources in the short term and force us to manage our expenses accordingly. Therefore, our outlook has changed. We now expect to be even and neutral rather than profitable in the second half of 2025. With that, I'm now trying to call over to Dave.

Thank you, Kevin, and good afternoon, everyone. As Kevin said, today I'd like to highlight a few of the milestones that we achieved in Q2. We have invested a lot in our expansion into the industrial scanning and handheld computing markets over the last two years. Those investments are struggling to bear fruit. We've seen a lot of interest from a variety of customers in warehousing and logistics, manufacturing, mining, oil and gas, energy, and construction. Life-scale testing is underway, and we've received purchase orders from multiple Fortune 50 companies at this point. As Kevin mentioned, the initial rollouts have gone exceptionally well. The ruggedized scanning market is large, and our entry into this space will help us diversify our business beyond retail. We expect the momentum of this space to continue building for us in the coming quarters and years. Our Xune Scan product line is comprised of three different configurations. Xune Scan case, the Xune Scan handheld, and the Xune Scan typical grill, all designed for iPhones. And now we are offering models with iPhone 16E inside, marking our entrance into the mobile handheld computing market. Xune Scan is designed to enable iPhones to withstand harsh industrial conditions, offering robust scanning capabilities with military-grade durability. This opens the door to new customer segments that demand the ultimate performance in the most difficult environments. And now we are starting to gain real traction in the ruggedized mobile handheld computing market. 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

Lin for more details on our financial. Lin? Lin, your line is open. Please press your mute button.

Thanks, Dave, and good afternoon, everyone. Our revenue in Q2 decays to 20% -over-year to $4 million, down from $5 million in the same quarter last year. The decrease reflects the continued suffering in customer demand and the cost of purchasing behavior of our products. From our channel partners, revenue remained roughly in line with Q1 levels. Gross margin for Q2 was 50%, down slightly from 51% in Q2 2024, but consistent with Q1 2025. The margin held a steady, despite the lower revenue, supported by ongoing cost control efforts, a favorable product mix, and the use of lower cost components and high volume SKUs. Operating expenses for Q2 were $2.7 million, compared to $3.1 million in the same quarter last year, and $2.9 million in the previous quarter. The reduction was primarily driven by the cost control measures implemented by the management in anticipation of slower business activity. As a result, we reported an operating loss of $0.7 million for Q2, compared it to a $0.5 million loss in Q2 2024, and a $0.9 million loss in Q1 2025. The sequential improvement reflects our efforts to align operating costs with current level, current revenue levels, even as the top-line performance remains challenged. Adjusted EBITDA for Q2 was a loss of $100K, compared to the positive EBITDA of $800 in Q2 last year, and a loss of $487 in Q1. The diluted loss to share for the quarter was 10 cents, compared to a loss of 8 cents in the same period last year, and 13 cents in Q1 2025. Turning to our balance sheet, as of June 30th, our cash balance was $2.6 million, supported by a closing of $1.5 million in convertible note financing in May. This compares to $1.7 million as of March 31st, and the $2.5 million as of December 31st, 2024. Cash offloads during Q2 included $160,000 for operations, and $140,000 in capital expenditure, primarily related to product tooling and software development. Inventory net off reserves was $4.8 million as of June 30th, down from $5.3 million at the end of Q1, and $5 million at year-end 2024. This reduction reflects tighter inventory management practices and the proactive efforts to avoid access to stock in a slower demanding environment. This is rest of our precarious remarks. Now I will hand the call over to operator for questions. Operator.

Thank you, Lynn. Yes, if you'd like to ask a question, please press star one on your phone now, you'll be placed into the queue in the order received. Please be prepared to ask your question more prompted. Once again, everyone press star one for a question,

and we'll pause for a moment to point a queue. Again, everyone, star one for a question. It appears we have no questions at this time, Lynn, I'll turn things

back over to you

for any additional or closing remarks.

Okay, thank you everyone for attending today's call. We wish you a good afternoon. Thanks.