DATA I/O CORP SEC 10-K Report

DATA I/O CORP, a leading provider of advanced programming and security deployment solutions, has released its 2024 10-K report, detailing the company's financial and operational performance over the past year. The report highlights significant changes in revenue, strategic initiatives, and the challenges faced by the company in a volatile market environment.

Financial Highlights

Net Sales: $21.8 million, a decrease of approximately 22% compared to 2023, primarily due to uncertainty in the automotive electronics sector and slowed customer capacity expansion.

Gross Margin: $11.6 million, down by 28.3% from 2023, reflecting lower sales volume and reduced absorption of fixed manufacturing and service operating costs.

Operating Income (Loss): $(3.0) million, compared to $0.4 million in 2023, driven by decreased sales and gross margin.

Net Income (Loss): $(3.1) million, compared to $0.5 million in 2023, impacted by lower sales and increased income tax expense due to withholding tax on repatriation of cash from China.

Basic Earnings (Loss) Per Share: $(0.34), compared to $0.05 in 2023, reflecting the net loss for the year.

Business Highlights

Revenue Segments: The company's revenue is divided into equipment sales, adapter sales, and software and maintenance sales. Equipment sales accounted for 51% of total sales in 2024, a decrease from 58% in 2023. Adapter sales increased to 33% from 29%, and software and maintenance sales rose to 16% from 13%.

Geographical Performance: In 2024, international sales represented approximately 94% of net sales, with significant growth in Asia partially offsetting declines in the Americas and Europe. U.S. sales decreased by 50.8% to $1.4 million, while international sales fell by 19.3% to $20.4 million.

Sales Units: The PSV family of automated programming systems, including the PSV2800, PSV7000, PSV5000, and PSV3500, offers a range of programming capacities and capabilities, with list prices ranging from $62,000 to $690,000. Manual systems are priced between $10,000 and $20,000.

New Product Launches: The company continues to develop and enhance its PSV family of automated systems, LumenX, and FlashPAK family of non-automated programmers. The SentriX security deployment system is offered as a software license or on a pay-per-use basis.

Future Outlook: The company anticipates leveraging its experience from past challenges to navigate future geopolitical, economic, and trade uncertainties. It plans to continue investing in technologies, products, and services to maintain market leadership, particularly in automotive electronics, IoT, and security deployment.

Operational Adjustments: The company has implemented geographic shifts in operations, optimized real estate usage, and adjusted pricing to address cost inflation and currency volatility. It also plans to increase internally developed rental, sales demonstration, and test equipment.

Leadership Changes: A key leadership transition occurred with the appointment of William Wentworth as CEO and President in late 2024, along with changes in the leadership of Sales, Marketing, and Engineering functions, aimed at driving revenue growth and operational efficiency.

Strategic Initiatives

Strategic Initiatives: The company is focusing on expanding its sales to service providers and enhancing its recurring revenue offerings to mitigate the decline in system sales. It is also investing in technologies, products, and services to maintain market leadership in its Unified Programming Strategy, which supports customers' preprogramming supply chain needs. Additionally, the company is leveraging operational and manufacturing resiliencies gained from past challenges to navigate future uncertainties.

Capital Management: The company maintained a strong cash position with $10.3 million in cash and cash equivalents as of December 31, 2024, and no debt. Working capital decreased by $2.3 million due to revenue decline and operating loss, but the current ratio improved to 4.2. The company completed a $3.4 million dividend distribution from its China subsidiary, incurring a $337,000 foreign tax withholding expense. There were no share repurchase programs in 2024 or 2023, and the company does not anticipate paying regular cash dividends in the foreseeable future.

Future Outlook: The company plans to continue managing capital expenditures carefully to support its business and increase internally developed rental, sales demonstration, and test equipment as new products are developed and released. It expects to have sufficient cash or working capital to fund operations and capital requirements through the next year and beyond. The company is also evaluating the potential effects of new accounting standards on its financial statement disclosures.

Challenges and Risks

Challenges and Risks: The company faces significant challenges due to geopolitical, economic, and trade uncertainties, particularly with the new incoming United States Administration. These uncertainties could impact the company's markets, customers, supply chain, and operations. Additionally, the company is heavily reliant on international sales, which represented approximately 94% of net sales in 2024, exposing it to risks related to foreign currency exchange rate fluctuations and international trade barriers.

Key Risk Factors:

• Tariffs and Trade Issues: Ongoing trade tensions between the United States and China, as well as tariffs, could adversely affect the company's revenues and gross margins.
• New Products or Services: The company's investments in new product initiatives may not yield the expected returns if market development is slower than anticipated.
• Technological Trends: Rapid technological changes in the industry could render existing products obsolete, impacting competitiveness and financial results.
• Automotive Electronics: A significant concentration in automotive electronics poses a risk if demand decreases, as it would take time to transition to other markets.
• Supply Chain Disruptions: Reliance on a small number of suppliers for key components could lead to shortages and increased costs.
• Cybersecurity Risks: Increasing cybersecurity threats could result in liabilities or costs, as well as damage to or loss of data.
• Regulatory Requirements: Compliance with evolving regulatory requirements, including those related to conflict minerals and climate disclosures, could increase costs and operational complexity.

Management's Discussion and Analysis: Management highlights the cyclical nature of the automotive and industrial electronics industry, noting that increased market uncertainty and slowing customer capacity expansion in 2024 led to a decline in automated systems shipments in the Americas and Europe. The company is leveraging its experience from past challenges, such as COVID-19, to navigate potential future uncertainties. Strategic changes in leadership and operational direction are expected to drive improved revenue growth and operational efficiency.

Market Risk Disclosures: The company is exposed to market risks, including fluctuations in foreign currency exchange rates, which may impact competitiveness and margins. Additionally, inflation, tariffs, and part shortages have led to product and service price increases. The company continues to monitor these risks and adjust its strategies accordingly.

SEC Filing: DATA I/O CORP [ DAIO ] - 10-K - Mar. 31, 2025