Socket Mobile's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Socket Mobile, Inc. ( SCKT)

Q4 2011 Earnings Call

February 22, 2012 05:00 pm ET

Executives

Jim Byers - MKR Group

Kevin Mills - President & CEO

Dave Dunlap - CFO & Secretary

Analysts

Brian Swift - Security Research Associates

Presentation

Operator

Greetings and welcome to the Socket Mobile 2011 annual and fourth quarter conference call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder this conference is being recorded. It is now my pleasure to introduce your host Jim Byers at MKR Group. Thank you Mr. Byers you may now begin.

Jim Byers

Thank you, operator. Good afternoon and welcome to Socket’s conference call today to review financial results for its 2011 fourth quarter and full-year ended December 31, 2011. On the call today from Socket are Kevin Mills, President and CEO; and Dave Dunlap, Chief Financial Officer.

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 www.socketmobile.com. In addition, a replay of today’s call will be available at www.vcall.com shortly after the call’s completion and a transcript of this call will be posted on Socket’s 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.

And 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 of the Securities Act of 1933 as amended and Section 21-E of the Securities and Exchange Act of 1934 as 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, 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 our products may be delayed or not rolled out as predicated 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 our application partners and current distribution channels may choose not to distribute the products or may be not successful in doing so.

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

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

Kevin Mills

Good afternoon everyone and thank you for joining us today. In today’s call, I will begin with a brief review of our progress in 2011, then discuss the business opportunities we see ahead and our outlook for 2012. We made substantial progress in 2011 and believe our initiative to strengthen our overall business and enhance our product offerings have set the stage for meaningful growth ahead. Our full-year revenue for 2011 were 17.5 million, up 30% over last year that includes solid year-over-year growth in revenue from both our handheld computer and cordless scanning family of products.

On a year-over-year basis, we also improved gross margin, reduced our operating expenses and strengthened our balance sheet. Our 2011 annual EBITDA performance also improved significantly to a loss of $154,000 or $0.04 per share compared to a loss of $2.5 million or $0.66 per share in 2010. Overall 2011 was a good turnaround year for Socket Mobile. Our revenue for the fourth quarter was $4.4 million consisting of $2.4 million of SoMo related sales, $1.7 million of cordless scanning related sales and $300,000 dollars from service and other legacy related products. While the Q4 total is up significantly year-over-year from $2.6 million in Q4 last year, we are disappointed in Q4 revenue which was impacted by less than expected sales of our SoMo that we believe is primarily a timing issue and not related to underlying market demand.

We were able to clear our long pending backlog of SoMos in Q4 and shipped almost 6,000 SoMo units to our distribution channel in the quarter. Unfortunately, a significant portion of these units did not clear the channels prior to year end and therefore didn’t count from a revenue point of view for our revenue recognition policy. The good news is that our supply problems are finally behind us as confirmed by the SoMo shipments we made in Q4.

We continue to see strong market acceptance and opportunity for our handhelds. But certainly, our SoMo supply problems in 2011 impacted our otherwise long-standing reputation with retailers as a solid and dependable supplier.

We’re working hard to restore the confidence of our retailers and distribution partners and our ability to be a solid and dependable handheld supplier.

With last year’s supply problems are already behind us and significantly improved product availability and delivery performance, we have been aggressively ramping up our marketing activities, especially towards Hewlett-Packard customers to encourage them to transition from the HP iPAQ to the SoMo handheld.

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