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DATA I/O CORP (DAIO)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 was soft: revenue $5.19M (-25% y/y), gross margin 52.2% (down ~580 bps y/y), and diluted EPS -$0.13 vs $0.02 a year ago; bookings of $4.1M (-42% y/y) and OpEx elevated by ~$0.62M of non-recurring items tied to leadership/strategic changes.
  • Full-year 2024 revenue fell 22% to $21.8M amid automotive capacity pauses in the Americas/Europe, partially offset by Asia growth; recurring adapters/services represented 50% of full-year revenue.
  • Management is resetting go-to-market (consultative sales, deeper service-provider focus), optimizing the core platform, and deploying AI agents to reduce cycle times; early indicators include shorter sales cycles (140→70 days in early 2025 sample) and higher adapter activity.
  • Balance sheet remains solid: cash $10.33M, no debt; backlog $3.5M at 12/31/24 (expected to aid 1H25 revenue).
  • Potential near-term catalysts: backlog conversion in 1H25, OpEx normalization as one-time charges roll off, traction with service providers, and consultative selling; risks include automotive timing and tariff/macroeconomic uncertainty.

What Went Well and What Went Wrong

What Went Well

  • Asia strength and recurring revenue resilience: Asia grew 14% for 2024; recurring adapters/services represented 50% of 2024 revenue, helping offset system shipment declines.
  • Cost actions and operating efficiency: full-year OpEx down $1.1M (-7% y/y); excluding one-time Q4 charges, OpEx would have declined >$1.7M (-12% y/y).
  • Strategic repositioning underway: consultative sales, platform optimization, algorithm library expansion, and AI-agent deployment (e.g., device request/algorithm process) with early signs of shorter sales cycles and increased adapter activity.

What Went Wrong

  • Top-line pressure and mix: Q4 revenue $5.19M (-25% y/y); bookings $4.1M (-42% y/y) as automotive capacity additions slowed, especially in Americas/Europe.
  • Margin compression: Q4 gross margin 52.2% vs 58.0% in Q4’23 on lower volumes and absorption of fixed manufacturing/service costs.
  • Elevated Q4 OpEx and losses: Q4 OpEx $4.0M included ~$500K one-time charges and ~$120K strategic investments; Q4 net loss -$1.18M and Adjusted EBITDA -$1.12M.

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Revenue ($M)$6.874 $5.062 $5.423 $5.185
Gross Margin %58.0% 54.5% 53.9% 52.2%
Operating Expenses ($M)$3.813 $3.323 $3.249 $3.992
Net Income (Loss) ($M)$0.144 -$0.797 -$0.307 -$1.182
Diluted EPS ($)$0.02 -$0.09 -$0.03 -$0.13
Adjusted EBITDA ($M)$0.514 $0.003 $0.037 -$1.115

YoY quick stats (Q4 2024 vs Q4 2023): Revenue -25%; bookings -42%; gross margin 52.2% vs 58.0%.

Operational KPIs

KPIQ2 2024Q3 2024Q4 2024
Bookings ($M)$5.6 $4.7 $4.1
Backlog ($M, end of period)$5.4 $4.7 $3.5
Deferred Revenue ($M, end of period)$1.279 $1.280 ~$1.6
Cash & Equivalents ($M)$11.44 $12.372 $10.326

Contextual metrics (FY 2024): Automotive 59% of bookings (vs 63% FY23); Asia revenue +14%; recurring adapters/services 50% of total revenue.

Guidance Changes

Data I/O does not provide formal forward guidance; management reiterated no forward-looking guidance on the Q4 call.

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueN/ANoneNoneN/A
Gross MarginN/ANoneNoneN/A
OpExN/ANoneOne-time Q4 items (~$500K restructuring, ~$120K strategic) not expected to recur in 2025Qualitative improvement expected
Other (Bookings/Backlog)Near-termNoneBacklog $3.5M expected to aid 1H25 shipmentsQualitative

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024 and Q3 2024)Current Period (Q4 2024)Trend
AI/technology initiativesDeploying AI/ML for efficiency; SentriX record units; Edge AI use cases (ADAS, smart city/industrial/IoT) AI-agent deployed to speed device request/algorithm processes; next-gen programming platform and manual system refresh planned Expanding scope and execution
Supply chain/tariffsRepatriated $3.4M from China; Americas auto softness; backlog slated for 2H24 Detailed tariff mitigation plans; multi-footprint manufacturing; potential adapter production shift if needed Active mitigation; resilience focus
Automotive/macroAuto demand paused in Americas; systems down; recurring ~49% H1 revenue Auto still soft; Americas/Europe weak; Asia resilient; backlog supports 1H25 Bottoming with gradual improvement expected
Go-to-market shiftEarly CEO transition; diversify beyond auto via distributors/EMS; cost controls Consultative sales, sales-cycle reduction (140→70 days early 2025), service-provider push (adapter activity +20% to +49% early 2025) Reorientation gaining traction
Cost/marginsSignificant OpEx reductions; stable GM% despite volume pressure One-time Q4 charges; underlying cost actions continue into 2025 Non-recurring items rolling off; structural savings continue
OrganizationCEO transition announced; expense discipline Leadership/organizational changes to align for scale (new VP Sales & Marketing, Quality Director) Team aligned to growth plan

Management Commentary

  • “Our team is optimizing the current programming platform and initiating a consultative sales process… plans to accelerate growth, drive profitability and expand market share.”
  • “Recent actions include the development of an AI-agent to improve a critical customer support function… We redesigned our Field Service and Support model… identified several actions to further reduce costs… increase attach rates of service contracts and better manage inventory.”
  • “Fourth quarter 2024 bookings were $4.1 million… Backlog… was $3.5 million… will benefit revenue recognition in the first half 2025… Gross margin… 52.2%… Operating expenses… included approximately $500,000 in one-time charges… [and] ~$120,000 for strategic enhancements.”
  • “We at Data I/O don’t give forward-looking guidance.”

Q&A Highlights

  • One-time charges: ~$625K of Q4 nonrecurring costs (restructuring/strategic) confirmed as not expected to recur in 2025.
  • Pipeline and bookings: Q4 was a low point; management expects improvement in bookings and revenue, aided by backlog conversion; early 2025 adapter activity up 49% (a leading indicator for platform usage).
  • Tariff mitigation: Multi-pronged plan leveraging global manufacturing, subcomponent import strategies, drawback mechanisms, and optional shift of adapter production if required.
  • Diversification beyond auto: Early traction with service providers (adapter activity +20% early in year), consultative selling playbook rolling out to reps by summer.
  • OpEx trajectory: Underlying run-rate historically ~$3.2–$3.3M/quarter with Q1 seasonally higher (audit/SEC); aim to hold expenses tight while reinvesting strategically.

Estimates Context

  • We attempted to retrieve S&P Global (Capital IQ) consensus for Q4 2024 revenue and EPS; the request failed due to a temporary SPGI daily request limit (“Daily Request Limit of 250000 Exceeded”). As a result, consensus estimates for Q4 2024 were unavailable at this time. We cannot provide a vs-consensus comparison for Q4 2024. [Values from S&P Global unavailable due to API limit]

Where estimates may need to adjust:

  • Given reported Q4 revenue ($5.19M) and EPS (-$0.13), and commentary on backlog aiding 1H25, models may need: (i) lower near-term gross margin percentage assumptions vs 2023 levels (volume absorption), (ii) removal of ~$0.62M nonrecurring Q4 OpEx when annualizing, and (iii) modestly higher recurring revenue mix and Asia weighting.

Key Takeaways for Investors

  • Revenue trough likely in Q4 2024; backlog ($3.5M) plus consultative selling suggests sequential improvement potential in 1H25, albeit without formal guidance.
  • OpEx normalization should aid EBITDA/EPS in 2025 as ~$0.62M of Q4 one-timers roll off, with cost initiatives continuing.
  • Mix shift to recurring (adapters/services) and focus on service providers may reduce cyclicality and broaden end-market exposure beyond automotive.
  • Tariff and supply chain risks are being actively mitigated via footprint flexibility and operational levers; watch U.S.-China developments.
  • Balance sheet is a defensive asset: $10.33M cash, no debt, ample working capital to fund strategy and navigate macro.
  • Medium term, execution on platform optimization, algorithm library expansion, and manual/semi-manual refresh could expand TAM and accelerate sales cycles.
  • Trading setup: absent guidance, stock likely keying off bookings/backlog conversion cadence, GM% recovery, and evidence of service-provider wins; any signs of automotive reacceleration or stronger adapter activity should be positive.