Executive Summary

Bookings inflected: Q2 bookings rose to $5.8M from $4.6M in Q1 (+~$1.2M) as auto EV demand in China offset tariff-driven CapEx delays; backlog ended at $2.8M and includes a 10-system UFS 4.0 order (> $1.4M) slated for 2H delivery .
Revenue of $5.95M grew 17% y/y but fell 3.7% q/q; gross margin compressed to 49.8% on lower-options system mix and prototype costs; GAAP EPS was ($0.08) vs ($0.09) y/y and ($0.04) in Q1 .
Non-GAAP lens: ~$480k one-time platform/IT/leadership costs in Q2 drove Adjusted EBITDA to ($0.44M); excluding these, AEBITDA would have been +$0.04M and operating loss would improve from ($0.84M) to ($0.36M) .
Catalysts into 2H: first UFS 4.0 win in China; multiple product launches (LumenX-M8/FCIII-M4 rolling into broader roadmap), six large trade shows, and management-identified ~$512k annual IT savings underway; management expects a broader product mix and improved margins in 2H while noting some CFO transition “double spend” in Q3/Q4 .

What Went Well and What Went Wrong

What Went Well
- Bookings momentum returned: Q2 bookings climbed to $5.8M (from $4.6M in Q1) despite tariff uncertainty; automotive represented 66% with Asia/China strength, and backlog ended at $2.8M with 10 PSV systems (> $1.4M) for 2H delivery .
- Strategic UFS 4.0 milestone and EV win: Data I/O received its first UFS 4.0 order and booked 10 systems with LumenX heads for a leading China EV supplier after demonstrating improved UFS capabilities .
- Cash and cost actions: Cash was ~$10.0M at Q2-end with no debt, while management is executing IT and cost initiatives that target ~$512k of annualized savings, roughly half implemented by Q2 .
What Went Wrong
- Margin pressure: Gross margin fell to 49.8% vs 51.6% in Q1 and 54.5% y/y, driven by a low-options mix on shipped systems and prototype/V1 reskin costs not tied to revenue .
- One-time costs weighed on profitability: ~$480k non-recurring platform, IT, and leadership transition expenses pushed operating loss to ($0.84M) and Adjusted EBITDA to ($0.44M) .
- Demand uncertainty ex-Asia: Europe and the Americas remained pressured by tariff/trade uncertainty, with Korea notably stalling CapEx versus initial expectations .

Financial Results

P&L summary (oldest → newest)

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue ($M)	$5.06	$6.18	$5.95
Gross Margin %	54.5%	51.6%	49.8%
Operating Expenses ($M)	$3.32	$3.57	$3.80
Operating Income ($M)	($0.57)	($0.38)	($0.84)
Net Income ($M)	($0.80)	($0.38)	($0.74)
Diluted EPS ($)	($0.09)	($0.04)	($0.08)
Adjusted EBITDA ($M)	$0.00	($0.10)	($0.44)

Operating KPIs and mix

KPI	Q2 2024	Q1 2025	Q2 2025
Bookings ($M)	$5.6	$4.6	$5.8
Backlog ($M, period-end)	N/A	$2.9	$2.8
Deferred Revenue ($M, period-end)	N/A	~$1.5	~$1.3
Revenue Mix – Consumables & Services	N/A	46%	50%
Auto Share of Bookings	N/A	66%	66%

Balance sheet snapshots

Metric	Dec 31, 2024	Mar 31, 2025	Jun 30, 2025
Cash & Equivalents ($M)	$10.33	$10.49	$9.97
Working Capital ($M)	16.1	>$16.0	15.6
Debt	None	None	None

Notes:

Q2 margin compression was attributed to low-options configurations in a large order mix and prototype/reskin costs; direct materials remained stable .
Q2 one-time expenses (~$480k) were tied to core platform/IT investments and HR/CFO transition; excluding these, Q2 AEBITDA would be ~$0.04M and operating loss would narrow to ~$0.36M .

Guidance Changes

No formal quantitative guidance was provided; management offered qualitative updates.

Metric	Period	Previous Guidance	Current Guidance/Commentary	Change
Revenue/Profitability	2H 2025	Not provided	Expect delivery of 10 PSV systems (> $1.4M) from China EV order in 2H; broader product mix expected to aid margins	Qualitative uplift
Gross Margin	2H 2025	Not provided	Mix expected to normalize with more balanced 3k/5k/7k systems; margin should improve vs Q2 trough	Positive qualitative
Operating Expenses	2H 2025	Not provided	CFO transition to cause “double spend” in Q3 and possibly Q4; identified ~$512k annual IT savings, ~half implemented by Q2	Mixed (temp up, run-rate down)
Product Roadmap	2H 2025	N/A	Multiple launches/events (China, Germany Productronica, India, Mexico) to drive leads; UFS 4.0 capability established	New info
End-Market/Region	2H 2025	N/A	Asia/China EV strong; Europe/Americas pressured by tariffs; mitigation through dual manufacturing, sourcing/logistics shifts	Ongoing headwinds

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’24 and Q1’25)	Current Period (Q2’25)	Trend
AI/Tech & Platform	Q4: AI-agent for support; focus on optimizing core platform . Q1: Unified Programming Platform; LumenX-M8, FCIII-M4 showcased; semi partnerships forming .	First UFS 4.0 order; heavy focus on UFS/NVMe yields; platform redesign (M8/M4), bench equipment, target 99.8–99.9% yields .	Accelerating execution
Supply Chain/Tariffs	Q4: Tariff/trade headwinds; dual US/China manufacturing . Q1: Bookings slowed late quarter on tariff uncertainty; mitigation via sourcing/logistics .	Demand impacted early Q2; improved in June; ongoing mitigation; minor tariff cost creep in inputs like aluminum .	Persistent but managed
Product Performance	Q1: Manual lineup refreshed (M8/M4); strong trade show interest .	Broader H2 launches; equal-weight mix of 3k/5k/7k systems expected; margin rebound expected on mix .	Product cycle building
Regional Trends	Q1: Asia down 40% y/y; Americas/Europe recovered sequentially .	Asia/China EV strength; Europe/Americas CapEx delays .	China-led rebound
R&D/Cost Structure	Q4: Cost reductions; optimization initiatives . Q1: Sequential expense reduction; Q1 public company costs .	Q2 one-time ~$480k investments/transition; identified ~$512k annual IT savings; ABC costing to refine margin visibility .	Near-term spend to enable savings
Diversification	Q1: Building beyond auto; consultative sales .	Still auto-heavy (66%); pipeline building, EMS/service initiatives, Salesforce Service Cloud rollout to monetize field service .	In progress

Management Commentary

“We received an order for 10 systems valued at over $1.4 million from one of the largest EV manufacturing suppliers in China due to our robust support for UFS 4.0 technology.” — CEO .
“Gross margin…49.8%… A lower margin product mix and configuration of automated systems driven by a large customer order led to reduced margins.” — CFO .
“Total one-time investments and expenses in the second quarter…approximately $480,000…Backing [them] out…Adjusted EBITDA would have been $43,000.” — CFO .
“We have six major events between September and November…These are big announcements that really drive…where Data I/O is going with its technology and its roadmap overall.” — CEO .
“We’ve already identified about $512,000 worth of spend reduction in our IT annually…about halfway…implemented.” — CFO .

Q&A Highlights

One-time costs and OpEx trajectory: ~$480k Q2 non-recurring spending primarily in G&A (IT, finance, HR/CFO); expect Q3–Q4 CFO transition overlap; identified ~$512k annual IT savings, ~50% implemented by Q2 .
UFS yield and platform redesign: Targeting 99.8–99.9% memory yields; bench equipment added; socket/contact strategy evaluated; moving from 8-site to 4-site architecture to increase per-pin power for UFS; near-term focus on 3.1 and 4.0 protocols .
Gross margin outlook: Q2 trough due to small systems with fewer options and prototype costs; 2H mix expected to be more balanced across 3k/5k/7k SKUs, aiding margins .
Bookings trajectory: Q2 bookings improved; management expects bookings to continue rising with product launches and show activity; ability to book-and-ship within quarter aided Q2 .
Diversification and field service monetization: Intensifying consultative sales, EMS penetration, and Salesforce Service Cloud rollout to convert service into recurring revenue via “milk runs” and health checks .

Estimates Context

S&P Global consensus for DAIO in Q2 2025 was not published; we found no EPS or revenue consensus figures to compare against actuals (microcap coverage appears limited). As a result, no beat/miss vs consensus can be determined for Q2 2025.

Consensus EPS: No published consensus*
Consensus Revenue: No published consensus*
Actual EPS (diluted): ($0.08)
Actual Revenue: $5.95M

*Values retrieved from S&P Global.

Key Takeaways for Investors

Bookings inflection and first UFS 4.0 win are tangible demand signals; 2H deliveries (10 systems, >$1.4M) and expanded event cadence should support order momentum and pipeline depth .
Q2 looks like a margin trough driven by mix and prototype costs; management expects mix normalization and margin improvement in 2H as product launches broaden the SKU/options mix .
Near-term OpEx noise from one-time platform/IT/leadership costs and CFO overlap should abate; identified ~$512k annual IT savings can aid 2026 run-rate profitability if executed .
Strategic focus on UFS/NVMe complexity plays to DAIO’s strengths; if yield targets are met and socket strategy executed, the company can differentiate in high-density memory programming across auto and beyond .
End-market concentration in auto (66% of bookings) remains a risk; watch for diversification progress via EMS/service initiatives and manual programmer uptake in 2H .
Cash (~$10M) and no debt provide resilience to navigate tariff headwinds and fund the roadmap; working capital remains solid .
Trading setup: Absent consensus benchmarks, narrative catalysts (UFS progress, 2H margin recovery, product launches) are likely to drive sentiment; monitor Q3 gross margin trajectory and bookings cadence for confirmation .

DATA I/O CORP (DAIO)·Q2 2025 Earnings Summary