Socket Mobile, Inc. (



Q1 2011 Earnings Call

April 26, 2011 5:00 PM ET


Jim Byers – SVP, MKR Group

Kevin Mills – President and CEO

Dave Dunlap – CFO, VP - Finance and Administration and Secretary


Brian Swift – Security Research Associates

Bernard Fidel – Private Investor

Steve Swanson – Private Investor



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Greetings and welcome to the Socket Mobile Q1 2011 Management Conference Call. (Operator Instructions). It is now my pleasure to introduce your host, Jim Byers of MKR Group. Thank you Mr. Byers. You may now begin.

Jim Byers

Thank you operator. Good afternoon and welcome to Socket’s Q1 Management Conference Call to review financial results for 2011 Q1. On the call today from Socket Mobile are Kevin Mills, President and CEO and Dave Dunlap, CFO.

Socket Mobile distributed its earnings release over the wire service at the close of the market today. The release has also been posted on Socket’s website at In addition a replay of today’s call will be available at shortly after the call’s completion. And a transcript of this call will be posted on the Socket website within a few days. We’ve also posted replay numbers in today’s press release for those wishing to replay this call by phone. The phone replays will be available for one week.

Before we begin I would like to remind everyone that this conference call may contain forward-looking statements within the meaning of section 27-A and the Securities Act of 1933 as amended in section 21-E of the Securities and Exchange Act 1934 is amended. Such forward looking statements include, but are not limited to, statements regarding mobile computer data collection and OEM products including details on timing, distribution and market acceptance of products and statements predicting trends of sales and market conditions and opportunities in the markets in which Socket sells its products.

Such statements involve risks and uncertainties and actual results could differ materially from the results anticipated in such forward-looking statements as a result of a number factors including, but not limited to, the risk that manufacture of Socket’s products may be delayed or not rolled out as projected 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 Socket’s application partners and current distribution channels may choose not to distribute the products or may not be successful in doing so.

The risks that acceptance of the company’s products and vertical application markets may not happen as anticipated and other risks described in Socket’s most recent form 10-K and 10-Q reports with the Securities and Exchange Commission. Socket does not undertake any obligation to update any such forward-looking statements.

Now with that said I would like to turn the call over to Socket’s President and CEO, Kevin Mills.

Kevin Mills

Thanks, Jim, and thank you for joining us today. In today’s call we will begin with a short review of Q1 and then outline the business opportunity we see for the rest of 2011.

On a very positive note we generated Q1 revenue of $4 million, a 54% sequential increase over the $2.6 million we reported in the preceding quarter. This solid increase was driven by significant sales increases in both our cordless scanning and handheld computing products. At the same time we further reduced our expenses during the quarter, which enables us to move within $300,000 of positive EBITDA. So we achieved both increased sales and bottom line improvement during Q1; a very positive step in the right direction.

I’ll begin with a review of our current handheld computing business and then provide a going forward outlook. Our handheld computing (inaudible) sales grew to $2.1 million in Q1, a 40% sequential increase over the preceding quarter. This is a significant increase but it doesn’t tell us much about the business since the revenue number was primarily driven by improved supply. You may remember we reported significant back orders enter Q1 due to the lack of LCD screens.

However, what is much more significant in Q1 are the new booking we received for the SoMo totaling $2.7 million. With these bookings we enter Q2 with an even larger backlog then we entered Q1. So demand for the Thermal continues to be very strong even though the related LCD supply problem has made it challenging to meet demand. As a result, in Q1, we shipped a total of 2945 SoMos, which was well below the demand level.

The LCD supply situation continues to improve and we have already received over 1000 units this quarter with an additional 3000 units plus expected during the quarter. While this will now allow us to completely clear our backlog, it will ensure that our SoMo revenue will grow in Q2 and we expect to enter the second half of the year with a manageable backlog.

So what is driving this demand for our SoMo handhelds? It’s a combination of several factors. Certainly the improving economy is helping and we are definitely seeing deals that went dormant over the past two years, come back and lead us to reengage with customers all with a good and positive event.

We are also seeing a positive impact resulting from HP’s exit from the classic PDA market. While HP is not fully out of the market, nor do we expect to see them completely out for another quarter or two, particularly in the US, we are seeing the impact of their departure in markets like Japan where they have already exited. Our bookings in Japan represented over 15% of our total quarterly SoMo bookings in Q1, which is extremely strong especially since historical sales for SoMo units out of Japan were almost non-existent.

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