Data I/O Reports Fourth Quarter 2022 Results

Momentum Continues as Bookings and Net Income Increase in Fourth Quarter; Full Year Bookings Reach 4 Year High

REDMOND, Wash. — (BUSINESS WIRE) — February 23, 2023 — Data I/O Corporation (NASDAQ: DAIO), the leading global provider of advanced security and data deployment solutions for microcontrollers, security ICs and memory devices, today announced financial results for the fourth quarter ended December 31, 2022.

Fourth Quarter 2022 Highlights

Net sales of $7.3 million; bookings of $6.8 million
Quarter-end backlog of $4.8 million
Gross margin as a percentage of sales of 55.5%
Net income of $510,000 or $0.06 per diluted share
Adjusted EBITDA* of $831,000
Cash & Equivalents of $11.5 million; no debt
Very strong APEX industry trade show (January 2023 in San Diego, CA) with Data I/O booth visitation up by more than 125% over 2021
Lumen^®X Programmers with new VerifyBoost^™ technology deliver 64% increase in programming performance
5 new customer wins

Full Year 2022 Highlights

Net sales of $24.2 million; bookings of $26.4 million which are a 4 year high
Gross margin as a percentage of sales of 54.5%
Net loss of ($1,120,000) or ($0.13) per share
Adjusted EBITDA of $1.3 million
Automotive Electronics represented 61% of bookings for 2022
SentriX^® bookings and revenue increased over 100% for second consecutive year
Deployment of over 440 PSV systems worldwide
21 new customer wins

^{* Adjusted EBITDA is a non-GAAP financial measure. A reconciliation is provided in the tables of this press release.}

Management Comments

Commenting on the fiscal year ended December 31, 2022, Anthony Ambrose, President and CEO of Data I/O Corporation, said, “Our performance in the second half of the year rebounded sharply from challenging global business conditions in the first half, as we continued strong sales and operational momentum from the third quarter.

“Revenue increased 14% in the fourth quarter, year over year. For the fifth consecutive quarter, we achieved bookings in excess of $6.0 million, with fourth quarter 2022 bookings of $6.8 million reaching the highest level for the fourth quarter since 2019. Backlog at the end of 2022 was $4.8 million. Demand is being driven by the continuing recovery in the automotive electronics market, strength in the industrial sector, and recovery in Europe.

“Automotive and industrial automation continue to represent the largest, fastest growing and most attractive market segments for our programming technologies. We have extended our leadership position in automotive electronics, with this market accounting for over 60% of bookings for the year. We had over 20 new customer wins in automotive and industrial during 2022, and our worldwide installed base of PSV systems increased by 58 machines in 2022 to over 440 from 390 at the end of 2021.

“New product launches included VerifyBoost^™ technology to support the automotive memory market with significantly improved UFS programming times by accelerating the verify portion of the programming cycle over 4.5x. We demonstrated connected factory enablement with ConneX Software, significantly improving factory integration with programming. And as we believe the world is entering into a golden age for security technology, we are pleased to report that our total SentriX® bookings and revenue increased by over 100% for the second consecutive year. In the fourth quarter we set a record for units programmed with SentriX as customers went into volume production. We continue to add products and capabilities to the platform and are pleased to have announced our new partnership in Japan earlier this week.

“Amid an economic backdrop where we expect a moderate recession and soft landing, we have positioned the Company for revenue growth, increased net income and cash flow generation in 2023. We maintain a positive outlook with a high level of backlog and deferred revenue, combined with a strong sales funnel and a weaker US dollar. Our end markets of automotive and industrial electronics continue their long-term growth in semiconductor consumption, with fewer supply chain issues. There is a surge of investment in and availability of electric vehicles (EVs) which are estimated to require 2-3x the amount of electronics content per vehicle as compared with internal combustion engine models. Finally, our demand profile may benefit from the potential impact of governmental reforms such as the Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 (CHIPS Act) and the Inflation Reduction Act of 2022. We are very encouraged with Data I/O’s outlook for 2023 and beyond.”

Financial Results

Net sales in the fourth quarter of 2022 were $7.3 million, up 14% as compared with $6.4 million in the fourth quarter of 2021. The increase from the prior year period primarily reflects a more normalized operating environment in the Americas and Asia which resulted in higher overall demand for equipment and higher adapter usage on business spread over a growing installed base of systems throughout the world. Fourth quarter revenues also reflect the shipment of a majority of backlog and systems in deferred revenue as of September 30, 2022. The higher revenues were partially offset by the impact of a strong US dollar.

For all of 2022, net sales were $24.2 million, down 6% from $25.8 million in 2021, reflecting lockdowns/port closures in China and global supply chain shortages negatively impacting financial results through the first half of the year and strength of the US dollar as compared with foreign currencies which reduced revenues in 2022 by an estimated $1 million. Total recurring and consumable revenues represented $2.7 million or 38% of total revenues in the fourth quarter 2022, as compared with $2.9 million or 46% in the fourth quarter 2021. Total recurring and consumable revenues represented 43% of the total in 2022, an increase from 42% in 2021.

Fourth quarter 2022 bookings were $6.8 million, up from $6.2 million in the fourth quarter 2021. Bookings for all of 2022 were $26.5 million, up from $25.5 million in 2021. Backlog at December 31, 2022 was approximately $4.8 million, down from approximately $4.9 million on September 30, 2022 and up from approximately $2.9 million at December 31, 2021. Additionally, deferred revenue is approximately $1.8 million at December 31, 2022.

Gross margin as a percentage of sales was 55.5% in the fourth quarter of 2022, as compared to 54.4% in the same period of the prior year. The difference in gross margin as a percentage of sales primarily reflects the impact of higher sales volume on relatively fixed costs, and product mix in the 2022 period, partially offset by inventory charges and currency strength of the US dollar. For all of 2022, gross margin was 54.5%, compared to 57.0% for the prior year.

Total operating expenses in the fourth quarter of 2022 of $3.4 million were down approximately $241,000 or 6.6% as compared to the 2021 period of $3.7 million. R&D expenses were $1.5 million in the fourth quarter of 2022 compared to $1.6 million in the fourth quarter of the prior year. Selling, general and administrative (“SG&A”) expenses were $1.9 million in the fourth quarter of 2022 compared to $2.0 million in the fourth quarter of the prior year. The lower operating expenses in the fourth quarter of 2022 was primarily a result of disciplined spending, lower incentive compensation and effects of the strong US dollar. For the full year, total operating expenses were $14.0 million, down approximately $1.0 million or 6.9% as compared with the prior year. R&D and SG&A expenses were $6.1 and $7.9 million, respectively, down from $6.6 and $8.4 million in 2021, respectively.

Net income in the fourth quarter of 2022 was $510,000, or $0.06 per diluted share, compared with a net loss of ($205,000), or ($0.02) per share, for the fourth quarter of 2021. Included in net loss are foreign currency transaction losses of ($156,000) for the fourth quarter of 2022 and ($138,000) for the fourth quarter of 2021. For the full year, a net loss of ($1,120,000), or ($0.13) per share, in 2022 compared to a net loss of ($555,000), or ($0.06) per share, in 2021. For the year 2022, the impacts of the weaker US dollar, war in Ukraine, COVID shutdown in Shanghai, China and semiconductor supply chain shortages resulted in a decline in revenue and increased losses in the first half of 2022 compared to 2021.

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