Earnings call transcript: Socket Mobile Q2 2025 misses EPS, stock drops 3.94%

Socket Mobile Inc., a micro-cap company with a market capitalization of $8.79 million, reported its second-quarter earnings for 2025, showing a decline in both revenue and earnings per share (EPS), which fell short of market expectations. The company posted an EPS of -$0.10, with actual revenue reaching $4 million. These results represent a 20% year-over-year decrease in revenue. Following the earnings announcement, Socket Mobile’s stock dropped by 3.94%, closing at $1.167, reflecting investor concerns over the company’s financial performance and future outlook. According to InvestingPro, the company’s overall Financial Health Score is rated as WEAK, with particularly concerning metrics in profitability and cash flow.

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Key Takeaways

• Revenue decreased by 20% year-over-year to $4 million.
• EPS fell short of expectations, reported at -$0.10.
• Stock price declined by 3.94% in reaction to the earnings report.
• New product line, ExtremeScan, launched targeting industrial markets.
• Company revised its 2025 outlook to EBITDA neutral, from previously profitable.

Company Performance

Socket Mobile’s performance in Q2 2025 was marked by a significant drop in revenue, down 20% from the same quarter last year. The company is experiencing challenges in both domestic and international markets, with a noted slowdown in general deployments. Despite the downturn, Socket Mobile is actively diversifying its product offerings, notably with the launch of its ExtremeScan line aimed at industrial applications, which is expected to drive future growth.

Financial Highlights

• Revenue: $4 million (20% decrease YoY)
• EPS: -$0.10
• Gross Margin: 50% (down from 51% in Q2 2024)
• Operating Loss: $700,000 (compared to $500,000 in Q2 2024)
• Adjusted EBITDA Loss: $100,000 (improved from $481,000 in Q1 2025)
• Cash Balance: $2.6 million

Earnings vs. Forecast

Socket Mobile’s EPS of -$0.10 fell short of expectations, indicating a challenging quarter for the company. The revenue of $4 million also came in below anticipated levels, highlighting the impact of broader market weaknesses and operational challenges.

Market Reaction

The immediate market reaction to Socket Mobile’s earnings was negative, with the stock price declining by 3.94% to $1.167. This drop reflects investor concerns about the company’s financial health and its revised guidance for the remainder of 2025. The stock is trading closer to its 52-week low of $0.91, indicating a cautious market sentiment. InvestingPro analysis suggests the stock is currently undervalued, though investors should note the company’s negative free cash flow yield of -22% and rapid cash burn rate.

Outlook & Guidance

Looking ahead, Socket Mobile has revised its outlook for 2025, now targeting EBITDA neutrality instead of profitability. The company plans to continue investing in strategic opportunities, particularly in the industrial scanning market, which it sees as a significant growth area. Despite current market softness, the company anticipates momentum in its new product lines in the coming quarters.

Executive Commentary

CEO Kevin Mills remarked, "We now expect to be EBITDA neutral rather than profitable in 2025," highlighting the company’s adjusted expectations in light of current market conditions. Dave Holmes, Chief Business Officer, emphasized the strategic shift, stating, "XtremeScan is designed to enable iPhone to withstand harsh industrial conditions, offering robust scanning capabilities with military-grade durability."

Risks and Challenges

• Continued market softness could impact revenue growth.
• Dependence on new product launches to drive future performance.
• Potential supply chain disruptions affecting production and delivery.
• Increased competition in the industrial scanning market.
• Economic uncertainties could further dampen demand across sectors.

Socket Mobile’s Q2 2025 earnings highlight both the challenges it faces and the strategic initiatives underway to navigate a shifting market landscape. While the company is poised to capture opportunities in industrial applications, achieving its revised financial targets will require overcoming significant hurdles.

Full transcript - Socket Mobile Inc (SCKT) Q2 2025:

Elvis, Operator/Conference Call Host: Good day, everyone, and welcome to Sakets Mobile Incorporated Q2 twenty twenty five Earnings Call. My name is Elvis, and I’ll be your operator for today’s call. Before we begin, I’d like to remind everyone that this conference call may contain forward looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended. Such forward looking statements include, but are not limited to, statements regarding mobile data collection, mobile data collection products, including details on timing, distribution and market acceptance of products in statements predicting the trends, sales, market conditions and opportunities in the markets in which Socket Mobile sells its products. Such statements involve risks and uncertainties, and actual results could differ materially from the results anticipated in such forward looking statements because of several factors, including, but not limited to, the risk that manufacturer of Socket’s products may be delayed or not rolled out as predicted due to technological, market or financial factors, including the availability of product components and necessary working capital the risk that market acceptance and sales opportunities may not happen as anticipated the risk that Socket’s application partners and current distribution channels may choose not to distribute products or may be unsuccessful in doing so.

The risk of acceptance of Socket’s products in vertical application market may not happen as anticipated, as well as other risks described in Socket’s most recent Form 10 ks and 10 Q reports filed with the Securities and Exchange Commission. Socket does not undertake any obligation to update any such forward looking statements. On the call with me today are Kevin Mills, Chief Executive Officer Dave Holmes, Chief Business Officer and Lynn Zhao, Chief Financial Officer. Now I’ll turn the call over to Kevin Mills. Kevin, please go ahead.

Kevin Mills, Chief Executive Officer, Socket Mobile Incorporated: Thank you, operator. Good afternoon, everyone, and thank you for joining us today. Our revenue for q two was $4,000,000, a decrease of 20% over q two twenty twenty four. We recorded margins of 50%, a slight decrease from the margins of 51% in q two twenty twenty four. Our operating loss was 700,000 compared to an operating loss of 500,000 in q two twenty twenty four.

Overall, q two was another difficult quarter. Revenue came in lower than expected as we saw weakness in both our domestic and international businesses. Uncertainty in the business environment has resulted in the delay of postponement of numerous projects. In addition, the level of general deployments seems to have slowed across the board. On the positive side, we did deliver our first extreme scan products to a large industrial customer.

And according to them, the deployment has been flawless, which is a very positive sign. Unfortunately, they have delayed a significant portion of the deployment to 2026. Dave will provide more color on the extreme scan progress opportunity in a few moments. As we believe the market will remain soft during the rest of 2025, we will have to continue to manage our expenses tightly. In q two, our expenses were lower than in q one, so we were able to record an EBITDA loss of just over a $100,000, significantly better than the $481,000 EBITDA loss recorded in q one.

We will control costs and sustain investments in research and development and Apple sales related opportunities. Most of the Apple related opportunities are significant, and even getting a few of them would have a significant long term benefit. We understand that this will strain our resources in the short term and force us to manage our expenses accordingly. Therefore, our outlook has changed. We now expect to be EBITDA neutral rather than profitable in the 2025.

With that, I’ll now turn the call over to Dave. Thank you, Kevin, and good afternoon, everyone. As Kevin said today, I’d like to highlight a few of the milestones that we achieved in Q2. We have invested a lot in our expansion into the industrial scanning and handheld computing markets over the last two years. Those investments are starting to bear fruit.

We’re seeing a lot of interest from a variety of customers in warehousing and logistics, manufacturing, mining, oil and gas, energy, and construction. Widespread testing is underway, and we’ve received purchase orders for multiple Fortune 50 companies at this point. As Kevin mentioned, the initial rollout has gone exceptionally well. The ruggedized scanning market is large, and our entry into this space will help us diversify our business beyond retail. We expect the momentum in this space to continue building for us in the coming quarters and years.

Our ExtremeScan product line is comprised of three different configurations. ExtremeScan case, the ExtremeScan hand belt, and the ExtremeScan pistol grip, all designed for iPhone. And now we are offering models with iPhone 16 e inside, marketing marketing our entrance into the mobile handheld computing market. XtremeScan is designed to enable iPhone to withstand harsh industrial conditions, offering robust scanning capabilities with military grade durability. This opens the door to new customer segments that demand the ultimate performance in the most difficult environments.

And now we are starting to gain real traction in the ruggedized mobile handheld computing market. Our new product and technology investments will extend our reach and diversify our customer base. Ultimately, this will make us more sustainable and less dependent on retail as we become a more complete data capture company. With that, I’ll turn it over to Lynn for more details on our financials. Lynn?

Elvis, Operator/Conference Call Host: Lynn, your line is open. Please check your mute button.

Lynn Zhao, Chief Financial Officer, Socket Mobile Incorporated: Thanks, Dave, and good afternoon, everyone. Our revenue in Q2 decreased to 20% year over year to $4,000,000 down from $5,000,000 in the same quarter last year. The decrease reflects the continued softness in customer demand and the cautious purchasing behavior from our channel partners. Revenue remained roughly in line with Q1 levels. Gross margin for Q2 was 50%, down slightly from 51% in Q2 twenty twenty four, but consistent with Q1 twenty twenty five.

The margin held steady despite the lower revenue supported by ongoing cost control efforts, a favorable product mix, and the use of lower cost components in high volume SKUs. Operating expenses for q two were $2,700,000 compared to $3,100,000 in the same quarter last year and $2,900,000 in the previous quarter. The reduction was primarily driven by the cost control measures implemented by the management in anticipation of slower business activity. As a result, we reported an operating loss of $700,000 for Q2 compared to $500,000 loss in Q2 twenty twenty four and a $900,000 loss in Q1 twenty twenty five. The sequential improvement reflects our efforts to align operating costs with current level current revenue levels even as the top line performance remains challenged.

Adjusted EBITDA for q two was a loss of 100 k compared to positive EBITDA of $8,000 in q two last year and a loss of $480,000 in Q1. Diluted loss per share for the quarter was 10¢ compared to a loss of 8¢ in the same period last year and the 13¢ in Q1 twenty twenty five. Turning to our balance sheet. As of June 30, our cash balance was $2,600,000 supported by a closing of $1,500,000 in convertible note financing in May. This compares to $1,700,000 as of March 31 and the $2,500,000 as of 12/31/2024.

Cash outflows during q two included $160,000 before operations and $140,000 in capital expenditure, primarily related to product touring and software development. Inventory, net of reserves was $4,800,000 as of June 30, down from $5,300,000 at the end of q one and the $5,000,000 at year end 2024. This reduction reflects tighter inventory management practices and the proactive efforts to avoid excess stock in a slower demand environment. This is rest of our prepared remarks. Now I will hand the call over to operator for questions.

Elvis, Operator/Conference Call Host: Operator? Thank you, Lynn. Yes. If you’d like to ask a question, please press star one on your phone now. You’ll be placed into the queue in the order receipt.

Please be prepared to ask your question when prompted. Once again, everyone, press star 1 for a question, and we’ll pause for a moment to form the queue. It appears we have no questions at this time. Lynn, I’ll turn things back over to you for any additional or closing remarks.

Lynn Zhao, Chief Financial Officer, Socket Mobile Incorporated: Okay. Thank you everyone for attending today’s call. We wish you a good afternoon. Thanks.

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