Data I/O Reports Fourth Quarter 2023 Results

2023 Revenue Growth of 16%; Bookings Momentum in Fourth Quarter;
Most New Customer Wins in 6 Years

Company Returns to Profitability on Higher Sales, Margin and Efficiency Improvements

REDMOND, Wash. — (BUSINESS WIRE) — February 22, 2024 — 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, 2023.

Fourth Quarter 2023 Highlights

Net sales of $6.9 million; bookings of $7.2 million
Quarter-end backlog of $2.8 million
Gross margin as a percentage of sales of 58.0%
Net income of $144,000 or $0.02 per diluted share
Adjusted EBITDA* of $514,000
Cash & Equivalents of $12.3 million; no debt

Full Year 2023 Highlights

Net sales of $28.1 million; bookings of $25.8 million
Gross margin as a percentage of sales of 57.7%
Net income of $486,000 or $0.05 per diluted share
Adjusted EBITDA of $2.3 million
Automotive Electronics represented 63% of bookings for 2023
SentriX^® software and pay-per-use revenues increased 150% from 2022
Deployment of over 485 PSV systems worldwide
23 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, 2023, Anthony Ambrose, President and CEO of Data I/O Corporation, said, “As expected, Q4 bounced back from a slower Q3 in bookings and revenue. We delivered strong financial performance in 2023 and experienced encouraging business momentum which has carried over into 2024. Top line growth of 16% in 2023 exceeded our annual outlook for double digit industry expansion pegged to our largest market of automotive electronics. This market represented over 63% of our bookings in 2023 and shows continued long term potential with analysts estimating automotive silicon content to be growing 10-15% per year throughout the remainder of this decade.

“Automotive and industrial automation continue to represent the largest, fastest growing and most attractive market segments for our programming technologies. Demonstrating our leadership position in the markets we serve, we had over 23 new customer wins during 2023 worldwide and across all segments. Our sales funnel has significantly expanded with customers interested in our advanced programming technologies. We had strong growth in Systems as well as Adapters and Software/Services. We had excellent growth in the Americas region as well as Asia outside of China in 2023. This reflects the rebalancing of supply chains and our global strength. We also saw a more than doubling of our SentriX pay-per-use (“PPU”) revenues in 2023, as several customers went into volume production.

“In 2023, we bolstered our leadership with the appointment of Gerry Ng as our CFO who has begun to implement initiatives to manage spending and inventory to better capitalize on our growth. This has put us on a trajectory to benefit from the significant operating leverage in our business model. In the second half of 2023, we sold through the higher inventory level and reset our spending to more normal levels. This disciplined approach improved our cash position and profitability in the fourth quarter.

“Our focus now is on continued growth from the Automotive, Industrial and Programming Center markets worldwide combined with tighter spending controls, process efficiencies and operating leverage to deliver strong bottom-line growth. We are excited by our outlook for 2024.”

Financial Results

Net sales in the fourth quarter of 2023 were $6.9 million, down 5% compared with $7.3 million in the fourth quarter of 2022. The decrease from the prior year was due to the timing of bookings to shipment conversion at year-end. Revenue increased 5% from the third quarter of 2023 due to improved market conditions, sales opportunity conversions and strong delivery execution. For all of 2023, net sales were $28.1 million, up 16% from $24.2 million for 2022, reflecting continued growth in the automotive electronics and IoT industries and favorable comparison to post-lockdown recovery one year ago. Automotive electronics represent 63% of 2023 bookings compared to 61% for 2022. Revenue mix remains steady with systems revenue at 58% and recurring and consumable revenue at 42% for 2023.

Fourth quarter 2023 bookings were $7.2 million, up 6% from $6.8 million for the fourth quarter of 2022. Bookings for all of 2023 were $25.8 million, down 2% from $26.5 million in 2022 due largely to customer purchase delays in the third quarter of 2023. Backlog on December 31, 2023 was $2.8 million, up $0.3 million from the third quarter of 2023. Additionally, deferred revenue was approximately $1.4 million on December 31, 2023.

Gross margin as a percentage of sales was 58.0% in the fourth quarter of 2023, as compared to 55.5% in the prior year period. Full year gross margin improvement was similar at 57.7% for 2023 compared to 54.5% for 2022. The full year increase in gross margin as a percentage of sales primarily reflects higher sales volume, material cost reductions, and operational efficiency improvements.

Operating expenses for the fourth quarter of 2023 were $3.8 million, up $402,000 or 12% from the prior year period. Full year 2023 expenses were $15.7 million, up $1.8 million or 13% from the prior year. The full year operating expense increase was primarily due to sales volume and profitability-based incentive compensations, market development to expand security offerings, and IT and operational infrastructure investments. Cost containment and efficiency improvements undertaken in the third quarter of 2023 contributed to lower operating expenses and higher profitability in the second half of 2023. Operating expenses at $8.3 million for the first half of 2023, declined by $948,000 or 11%, to $7.4 million in the second half of 2023.

Net income in the fourth quarter of 2023 was $144,000 or $0.02 per diluted share, compared to net income of $510,000 or $0.06 per share for the prior year period. The decline was due largely to lower revenue and higher operating expenses partially offset by improved gross margins. For 2023, net income was $486,000 or $0.05 per diluted share, compared to a net loss of ($1,120,000) or ($0.13) per share in 2022. The 2023 revenue increase of $3.8 million and gross profit improvement of 320 basis points contributed to a net income increase of $1.6 million or 42% operating leverage from 2022.

Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), which excludes equity compensation, was $514,000 in the fourth quarter of 2023, compared to $831,000 for the prior year period. For the full year, Adjusted EBITDA was $2.3 million in 2023, compared to $1.3 million in 2022.

The Company’s balance sheet remained strong with cash at the end of the fourth quarter of 2023 at $12.3 million, an increase of $831,000 from $11.5 million on December 31, 2022. The full year cash increase reflects improved operating profitability, higher net interest income and lower inventory levels. Data I/O had net working capital of $18.4 million on December 31, 2023, up from $17.6 million on December 31, 2022. The Company continues to have no debt.

Financial Outlook for 2024

Based on continued strength amid a stable global operating environment, the Company is providing its financial outlook for 2024. Data I/O expects double-digit bookings growth in 2024, consistent with the long-term double-digit semiconductor growth rate in the automotive electronics industry and reflecting the benefits from an increasing installed base of systems. Gross margins are expected to be in the mid-to-high 50% range for the year. Operating expenses for 2024 are expected to be consistent with to moderately lower than 2023, except for variability in incentive compensation, sales commissions, and currency. As a result of the Company’s disciplined growth strategies, gross and operating margins may be further improved.

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