管理層發言
Good afternoon, everyone, and welcome to Data I/O's First Quarter 2026 Financial Results Conference Call. Please note, this event is being recorded. At this time, I'd like to turn the conference over to Mr. Jordan Darrow, Investor Relations. Please go ahead, sir.
Thank you, operator, and welcome to the Data I/O Corporation First Quarter 2026 Financial Results Conference Call. In addition to the earnings, we are also addressing the recently announced transformational acquisition and strategic direct investment of $9 million. With me today are the company's President and CEO, Bill Wentworth; and Chief Financial Officer, Charlie DiBona. Before we begin, I'd like to remind you that statements made in this conference call concerning future events, results from operations, financial position, acquisitions, financings and capital markets initiatives, economic conditions, supply chain expectations, estimated impact of tax and other regulatory reform, product releases, new industry participants 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 in such statements. These factors also include uncertainties as to the impact of global and geopolitical events, international tariff and 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 Form 10-K and 10-Q with the Securities and Exchange Commission in our press releases and other communications. The company may also reference GAAP and non-GAAP financial performance measures, including one-time items, which are intended to provide listeners with a means to better understand the company's performance. Please refer to reconciliations in our earnings press release issued today after the market closed. Finally, the accuracy and completeness of all discussions on this call, including forward-looking statements, should not be unduly relied upon. Data I/O is under no duty to update any forward-looking statements. And now I'll turn the call over to Bill Wentworth, President and CEO of Data I/O.
Thank you very much, Jordan. As you heard from Jordan, we obviously have a lot of great news to talk about today, but I will start with a bit on Q1 and what we did to pivot within Q1 to get the momentum that we now have in Q2 in the core business. We had some really good plans going into the year. They were well thought out. As you know, we have a very large installed base globally, and a lot of that equipment has certainly aged and some of it is aging out. Our plans were really around generating revenue through our existing clients first. Obviously, that's the easiest place to go. Things got off to a slightly slower start than we thought, so we made some pivots and changed a bit of our messaging. You can see through Q1, especially into March, where bookings really started to pick up. We didn't get those bookings in time to ship, but they certainly came into Q2 strong and that continued to accelerate. Historically, this company has typically not given guidance, so this is somewhat new. I'm highly confident we'll be moving north of $5 million, both in bookings and revenue for the quarter. I won't go beyond that. This is to give shareholders an understanding of directionally where the business is going on its own. Obviously, we have an investment and an acquisition we're going to talk about, but it's important that shareholders and listeners understand the core business is healthy. It was a slow start, but we've got new products rolling out in the second half and good momentum. A lot of it is actually in North America and Mexico; Asia is still a bit slow. We did book three purchase orders — four systems in Europe — which is more than we booked in the last two years combined in Q1. So we are seeing a pickup. We also have landed about three net new logos since the beginning of the year and have three right now in the active pipeline for this quarter that we have a good chance of closing. These are net new logos that we've never invoiced before, which is a big part of our plan to diversify our customer base because we were so heavily reliant on automotive. In the past, those numbers were 58% to 63%. When I dug in during the year, especially in the second half, it was clear a lot of the subcontractor work we had classified as industrial was really automotive. Coming off a tough time in automotive, this has been a big transition overall for us, but we're seeing some automotive customers come back. We happen to be aligned with a few of the right customers there. We feel really good about Q2 and where we're going with the core business. Charlie will get into some of the financial details. We had some one-time write-offs, and as we optimize the business that has been a big part of the last two quarters. I will tell you that going into this quarter, our breakeven for the overall business, starting April as a clean month going forward, is less than $22 million a year overall. When I started, it was close to $27 million. AI has been a big part of the ability to get more productivity and also save money. AI is impacting our lives everywhere — across companies and domains. CEOs are asked about how they're deploying AI all the time. It has a real positive impact on companies and productivity. We've seen a lot of that in different projects we're working on, and I'll talk more about that in the Q&A. I'd like to move on to the direct investment. This is something we've been working on and looking at in the M&A pipeline that we started to build when we brought Benchmark on as an adviser; that pipeline has stayed healthy. We're really looking for a transformational acquisition. There are some small acquisitions we could do, but we really needed something that would take us to the next step, give us scale and scope, and increase manufacturing capacity. We've been talking to a company over the last three to five months. During that time, talking to some investors, I'm happy to announce we were able to bring in $9 million of proceeds in common stock, warrants, and a convertible debenture in support of our current M&A activity as well as future M&A. A fundamental institutional investor has been following our progress and met with us multiple times. I think we've built a really good relationship with that investor and others that are looking. So I like where we're going as far as bringing in new money. This is a new day and age for Data I/O. The team is excited. The companies we're talking to are excited. There's a very large growing market for us. If you look at the overall semiconductor market, it has risen significantly over the last several quarters. Much of that has been in specialty parts such as GPUs and high-speed memory, but now the tide is rising for everybody. As AI becomes more pervasive across infrastructure, other things need to be built to support or take advantage of AI automation. We're seeing that in robotics, edge, and the network — two of our new logos are robotics companies. Those were target markets for us. We're excited about where Data I/O sits in that supply chain and about getting into services. I'll talk more about the acquisition later, but if you followed our launch of our new website on April 10, it was a dynamic change in the company's history. You can see programming as a service, and we are in four or five deep discussions with significant large subcontractors that want to move from doing it themselves to programming as a service on-site or regional. My expertise is services, so this falls into my comfort zone and I'm looking forward to getting back into the services business. It's a great industry: recurring, higher-quality revenue, improved cash flows, and it reduces the lumpiness of CapEx. Charlie will enjoy those new cash flows as we expand services. We're focused on developing the software to also run our products in a multi-tenant environment, which leads to better recurring revenue and a more predictable business. I'll move on a bit to the acquisition but will save time for Q&A. As I said, we've been working on this acquisition for quite some time. The team is excited about what the acquisition does for the company. It will help accelerate growth, expand scale and scope, and increase manufacturing capability. It is truly transformational. It will double the size of this company from a run-rate perspective once we close. I expect that to happen by the end of Q3. At this point, I'll hand the call over to Charlie.
Good afternoon, everyone. I'm going to cover four areas today. First, I'll walk through our first quarter financial results. Then I'll move on to our updated business framework and second quarter revenue guidance because I suspect that's top of mind for everyone. Third, I'll discuss the $9 million direct investment and what it means for our balance sheet and capitalization. And finally, I'll walk you through the transformational acquisition that Bill was just discussing. Let me start with the quarter. Net sales in the first quarter were $3.3 million, down from $6.2 million in the first quarter of 2025. The reduced revenues in part reflect lower bookings and backlog coming out of Q4, which was a function of the broader industry dynamics we discussed in prior calls. In addition, as Bill noted, we saw a slower-than-expected ramp of our new sales initiatives. That said, we experienced positive acceleration of traction and momentum through the quarter. First quarter bookings were $4.2 million, which was a meaningful improvement from the $3.1 million in the fourth quarter of last year, though it was still below the $4.6 million we booked in Q1 of 2025. We're encouraged by the sequential improvement both quarter-over-quarter and through the course of Q1 and, importantly, by the composition and quality of the interest and bookings we're seeing. Regionally, first quarter bookings were strongest and most notably improved in Europe, as Bill mentioned. We saw especially late-quarter growth in Europe, which is very encouraging. Revenue mix was 47% adapters and 34% software and services, representing 81% of total first quarter revenue, providing a very stable and recurring revenue base with capital equipment making up the remaining 19%. We do expect that capital equipment sales, with the strength in bookings, will rebound in Q2. Backlog as of March 31 was $2.6 million, up from $2.3 million at year-end, and deferred revenue was held consistent at $1.5 million as of both quarter ends. Gross margin was 49.5% in the first quarter compared to 51.6% in Q1 of last year. The decrease reflects lower absorption of labor and overhead costs on the reduced revenue base. Direct material costs, however, remained relatively steady, and the teams have continued to actively mitigate the impact of tariffs and other inflationary pressures. Operating expenses were $4.75 million for the quarter, of which approximately $1.2 million was one-time expenses. The one-time items were primarily related to the optimization of our German operations, ongoing investments in our core programming platform, information systems, and our ERP transition. Excluding the one-time items, operating expenses were approximately $3.55 million, which is in line with prior year despite the additional operating complexity of the transition we're executing. I want to emphasize that point: ongoing operating costs are being managed down even as we invest for the future. Bottom line, net loss for Q1 was $3.2 million, or $0.34 per share, compared with a net loss of $382,000, or $0.04 a share, in Q1 of 2025. The increased loss reflects both lower revenue and the one-time expenses. Adjusted EBITDA, excluding equity compensation and one-time items, was a negative $1.75 million for the quarter compared to a negative $98,000 a year ago. Both periods include elevated overhead for annual public company expenses that are generally paid in the first quarter. On the balance sheet, cash at the quarter end was $5.7 million compared with $7.9 million at year-end. The decline reflects cash expenses paid annually in the first quarter, including public company compliance costs and insurance renewals, along with one-time items, platform investments, and a temporary increase in inventory as we built ahead to satisfy the demand we saw through the end of the quarter. Net working capital was $9.3 million, down from $12.3 million at year-end. Importantly, we continue to have no debt on the balance sheet as of March 31. Today, we announced a private placement resulting in aggregate proceeds of $9 million, which I'll discuss in detail shortly. Before I get to that and the strategic transaction, let me address the forward outlook because I know near-term trajectory is top of mind. Our framework for 2026, which we discussed in the last quarterly call, is built on the following pillars: organic revenue growth for 2026 over 2025; we continue to see good demand signals for that as well as strength in our recurring revenue base and new sales models; acceleration of recurring and services revenues, including the launch of our on-site programming as a platform service; entry into the programming services market, which represents a meaningful opportunity to expand our addressable market and is an area where Bill has particular expertise; operational optimizations driving improved gross and operating margins. As revenue increases, we expect not only better absorption of labor and overhead, but mix will also play a role as we introduce higher-margin software and services; expense reductions totaling approximately $1.8 million in annual run rate from operational optimizations implemented since the beginning of 2026, which are already in place; and AI is deeply ingrained across all functions and driving productivity gains in engineering, operations, customer support, administration, and finance. Now for the second quarter, we are providing revenue guidance of $5 million to $5.4 million. That implies a minimum of approximately 20% sequential growth from the first quarter. I want to be very clear that we are providing this guidance in context. As we saw the sequential acceleration of sales activity within the quarter, we also saw some revenue recognition slippage of bookings that were processed but pushed into Q2 based on the timing of revenue recognition. The Q2 guidance includes these delayed first-quarter sales as well as solid new activity early in the quarter. The demand did not disappear; it shifted. The combination of late Q1 momentum carrying over and customer engagement building in Q2 gives us visibility to provide this range. I also want to be equally clear: we do not expect to be providing revenue guidance or other specific forward-looking guidance on a regular basis going forward. This quarter is an unusual circumstance as we saw such rapid acceleration from a weak start. We believe it's important and appropriate to share that with investors in this instance, but this should not be taken as a precedent for ongoing quarterly guidance. On an organic basis, the combination of revenue growth and cost discipline gives us line of sight to positive operating cash flow on an organic basis by the end of 2026. That organic basis does not yet include the strategic acquisitions we are discussing today or others that might come through the year. Now to the $9 million direct investment, which we announced today and expect to close before the end of May. We entered into a securities purchase agreement with a single institutional investor for aggregate gross proceeds of $9 million. The structure, as in the press release, is as follows: the investment includes the issuance of approximately 870,000 shares of common stock, a convertible debenture in the principal amount of approximately $6.8 million, and warrants to purchase up to 1.08 million shares of common stock. The warrants carry an exercise price of $3 per share and are exercisable for five years from issuance. The convertible debenture is unsecured and is convertible into Series B preferred stock, which is nonvoting and convertible into common stock at an initial conversion price of $2.50 per share. The debenture will automatically convert upon receipt of stockholder approval pursuant to NASDAQ rules. Let me explain why this is the right transaction for the company. First, it validates our strategy. This is a sophisticated institutional investor making a significant commitment to Data I/O at this stage of our transformation; they will become our single largest shareholder. That conviction from an institutional source at this inflection point is a strong signal. Second, it strengthens the balance sheet. $9 million in gross proceeds provides additional working capital and financial flexibility without encumbering the company with traditional secured debt. The debenture is unsecured, and we anticipate its conversion to preferred stock. This gives us room to operate and invest. Third, it enables our M&A strategy. Combined with our existing cash and the deal structure we've negotiated for the acquisition, this capital positions us well for the transaction and to continue investing in the organic business. Fourth, the terms are reasonable and aligned. The coupon of the debenture is modest. The conversion and warrant exercise prices reflect a premium to where the stock has been trading, and the investor's willingness to take a large position speaks to their confidence in the combined organic and inorganic plan. The investment strengthens our foundation. We executed a letter of intent to acquire a leading manufacturer in our space. The total consideration is approximately $23 million, and upon closing, as Bill mentioned, this acquisition is expected to nearly double our annual revenues and be immediately accretive to both earnings and cash flow. As a notable part of the structure, about $3 million of the purchase price will be in the form of equity. The fact that the current private equity owners have agreed to take roughly 15% of the consideration in our stock is meaningful. These are people who know the business best and are expressing confidence in the value of the combined enterprise. To summarize, the first quarter financials reflect where we've been: a business in transition with costs coming down and customer activity building. The Q2 guidance of $5 million to $5.4 million reflects where we're going on an organic basis. The $9 million investment gives us the balance sheet to execute, and the acquisition that nearly doubles our revenue is accretive to earnings and cash flow. We're excited about what lies ahead and look forward to updating you as we move through the closing process and begin integration planning. With that, I'll turn it back to the operator for the Q&A portion of the call.
分析師問答
Congratulations on the transaction. Very exciting. First question is for Charlie. Bill called out a breakeven of $22 million with the restructuring. So, Charlie, just to clarify, you're saying at $5.5 million per quarter you'll essentially be EBITDA neutral. Is that correct? And then what is the...
Assuming gross margins stay roughly in line with where they've been, yes. Which we should see.
There's a slight improvement on some of the changes. We'll see more improvement with the acquisition, but yes, that's a bright state.
Okay. And then, Bill, you alluded to this will roughly double the size of the company. So let's say, for example, that number is $20 million in services. Is this a double-digit, like a 15% EBITDA margin business? How should we look at that in terms of modeling going forward?
I think it's a little early to model that because there's a lot to investigate during due diligence, which we just kicked off yesterday. I'd hold that back for now. It's not all services — probably around 60-40 services to capital equipment. The services that come with this company are much more recurring than our current recurring adapter and supply chain business and are fairly consistent. It will double the size of the company and be accretive. There is a lot of work to do between now and close, but there is upside across the board and potential improvement in gross margin for both companies. AI and productivity improvements have allowed us to reduce design times and technical debt; some projects that used to take years we can reduce significantly, which creates more upside.
Okay. And then in terms of the capacity to grow organically with the existing footprint or facilities they have, what is the opportunity of that $20 million or so in revenue? Where do you think you can grow that organically with their current facilities?
Great question. Taking a tour of the facility, I saw clear expansion capabilities to scale. As we grow Programming as a Service, I'll be building more equipment for long-term contracts around on-site programming. We would not be able to do that here at our current footprint, so this acquisition allows us to accelerate Programming as a Service because they have plenty of manufacturing space for us to grow into as well as their core business.
Okay. And then final question before I go back into the queue — my apologies for monopolizing. I'm just rapid-firing questions...
No worries. We love the multiple questions today. There's a lot going on.
So Bill, you alluded to potentially the market coming to you. There's increasing urgency around edge AI infrastructure build-out and security provisioning. Can you talk a bit about that AI build-out and exactly where that intersects with programming and what this opportunity is over the next 12 to 24 months?
Absolutely. We've been waiting for this wave and saw signs of it in Q4. Conversations accelerated toward the end of Q1, and now we're deep in discussions and getting POs and booking new logos. It's really products that surround or utilize AI, such as robotics and automation in cars. We have a new client we should be announcing soon that has a very large business in both sectors. Automation will drive other products that need to be automated or the ability to accept automation and AI signals. If you look at Avnet and Arrow's recent quarters, their numbers have surged, and they're a good barometer of trends because they're like supermarkets of semiconductors. I separate those trends from the specialty vendors like Micron and NVIDIA, which are in a different stratosphere, but the overall semiconductor industry is rising as well because more components are needed. There are many automated solutions needed for these things even if some chips are not programmable. The push is here, it's starting to bring other industries in, and that's what we're seeing and hearing from customers. The OpEx model is attractive to customers because decisions are often made at the director or manufacturing manager level, allowing us to execute multiyear contracts and services, including a managed service fee on top of multiyear contracts with guaranteed volumes and minimum monthly revenues. I'm looking forward to that, and opening regional programming centers makes sense. We have a huge installed base; many customers bought one system and never bought again, but they still have programming business we can take back regionally. We can give customers value even on older equipment because depreciation may be minimal and our programming adapters and services still provide value. I hope that answers your question.
I'm new to the story, and I apologize if this is naive. Could you elaborate a bit more on the company you're targeting that does semiconductor handling and packaging? Why is the seller wanting to sell?
They weren't in a process actively; sometimes timing and finding the right dance partner matters. In M&A, when you're transforming a company you look for strengths and weaknesses and adjacent markets where a target adds value to accelerate growth. This target's business has strengthened over the last 1.5 years and they're going into this year strong, so the match between our companies made sense. If they were going to go to market at some point, we would likely have been a potential bidder. Both parties decided this is a good time to merge given the opportunities for both firms and the complementary strengths and weaknesses.
Who from the other company is joining you?
I can't get into those details yet. We just kicked off early due diligence. We'll provide more on that once we close and can discuss the strategic rationale, how we will align strategies, and the team members. That's a bit premature now.
Okay. And I missed one thing — how many warrants are included with this deal?
1.08 million warrants.
Congrats on the next step in this transformation. It's good to see. A couple of questions. First, a little one: of the $5 million in Q2 that you're guiding toward, is any of that programming as a service? Has that started to kick in yet? When do you see that kicking in, and what's the scope and ballpark of revenue you see that contributing?
No, that Q2 guidance does not include any Programming as a Service revenue. We are deep in conversations with eight clients — existing customers that already have our equipment but are expanding or looking to move to an OpEx model. I'd be surprised if we didn't have at least one to three contracts signed by the end of Q3. There's a little bit in Q4, but none of that revenue is built into the current model for Q2.
And in terms of contract size, what do those deals typically look like?
From experience, minimum annual volumes are usually around $1 million to $1.5 million. A big contract could be $5 million or $10 million, and there are deals of $20 million-plus. We have one subcontractor discussing giving us space at one site to service six others from that site, so deals can get big quickly. At 10 million-plus parts and an average programming price between $0.09 and $0.15, excluding security provisioning, the revenue profile is strong. There's also a managed service fee for sockets and maintenance and software, and these will typically be multiyear contracts — three-year minimums — so very dependable, reliable revenue. One more point that's important: security provisioning is becoming more important. There's the Cyber Resilience Act (CRA) coming out of the EU, which becomes mandatory in September 2027. We're starting to see security provisioning become an important requirement going into 2027. Security provisioning can be about twice the programming charge. We have three opportunities in India right now; in one case, there's an on-site programming center that's unhappy with their current services, so we have opportunities to displace competitors.
If I do the numbers — $23 million total consideration with roughly $20 million in cash — you're raising $9 million gross and have $5 million on your balance sheet. That still leaves $6 million to $7 million unaccounted for. How are you going to finance the rest of the acquisition?
I'll turn that over to Charlie.
We're looking at a potential combination of other sources of cash and potential debt or assumption of debt. The target does have some debt on their balance sheet currently, and we may bring that over; that might be the most expeditious path. We are confident about our ability to secure the rest of the financing.
So you need to raise more money in order to close the transaction? Is that one of the conditions of closing?
No, we don't need to raise more equity. We think we can do it most likely with debt or assumption of their debt.
Okay. Then finally, in terms of the big picture, is this acquisition the next step in the process and then you integrate and go forward, or do you still plan other acquisitions in the next six to twelve months?
This gives us a second leg in our strategy. Services remains on our schedule, whether pursued organically or by acquisition. Doing both accelerates everything. There are other service-only providers worth looking at. This is the first step, but it gives us a great foothold along with what we're already doing organically.
I'm having a little trouble understanding what this acquisition actually does. You suggest it's a manufacturing company, somewhat similar to what you do, so I get the sense they're a competitor, but then they also provide programming as a service. Help me to understand more broadly what this company does.
They operate in a couple of different, complementary markets. I wouldn't call them a direct competitor. We're looking at adjacent plays and services. One attribute of their business is they have diverse domains — less than 10% of their business is automotive — and they service semiconductor companies, military, defense, and aerospace customers. Those customer relationships are significant and we can leverage them. When mapping strategy after a transformational deal, you identify people who will help execute the plan; we've found talented people in the industry that can help both companies grow. There's only so much I can share now, but you'll get a clearer picture after close. All right. I want to thank everybody for their time today. This is an exciting time in Data I/O's history. We have team members who have been here 20, 25, and 35 years, and the energy in the building is tremendous. People who planned to retire six months to a year ago are staying; they're excited about this next chapter. These are key contributors who have been with the company for a long time and are energized for what's ahead. We're focused on graduating talent from within and giving younger generations opportunities. We're grooming great leaders for the future. There's still a lot of work to do; this is where the real work begins. The last three months have felt like ten years. I've done enough M&A and integration in my career; Charlie has too, and we've brought in executive talent with M&A and integration experience. How you handle people during integration is critical — culture is a huge part and probably the number one factor. Bringing strengths and weaknesses together in a complementary way, in my experience, accelerates growth. We're looking forward to this and thank everyone for their time. We're excited about the next several updates over the coming months and quarters. Thank you.
Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.