UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q DATA I/O CORPORATION (Exact name of registrant as specified in its charter) Washington 91-0864123 (State or other jurisdiction of incorporation or organization) (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period fro ...

[Management Comments](index=1&type=section&id=Management%20Comments) Management reported sequential bookings growth, driven by a major Chinese EV order for UFS 4.0 systems, validating R&D and preparing for future 1TB UFS memory for AI - Delivered the **second consecutive quarter of sequential bookings growth**, following increases in Q1 2025 and Q4 2024[3](index=3&type=chunk) - Received a significant order for 10 PSV automated programming systems, valued at over **$1.4 million**, from a major Chinese EV manufacturing supplier, based on robust support for Universal Flash Storage (UFS) 4.0 technology[3](index=3&type=chunk) - The company focuses on technology leadership for the growing UFS memory market (expected **14% CAGR** over five years) and is preparing for next-generation **1TB UFS memory** for advanced AI applications by 2027[6](index=6&type=chunk) [Second Quarter 2025 Financial Results](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Results) Q2 2025 saw net sales of $5.9 million, sequential bookings growth to $5.8 million, a gross margin of 49.8%, and a net loss of $742,000, with a solid $10.0 million cash balance [Revenue, Bookings and Margin](index=1&type=section&id=Revenue%2C%20Bookings%20and%20Margin) Q2 2025 net sales were $5.9 million, bookings reached $5.8 million, and gross margin was 49.8% due to product mix, with automotive electronics contributing 66% of bookings Net Sales and Bookings (in millions) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Sales | $5.9M | $6.2M | $5.1M | | Bookings | $5.8M | $4.6M | $5.6M | - Gross margin was **49.8%** in Q2 2025, compared to **51.6%** in Q1 2025 and **54.5%** in Q2 2024, with the decline driven by product mix and configuration for a large customer order[9](index=9&type=chunk) - Backlog stood at **$2.8 million** and deferred revenue was **$1.3 million** as of June 30, 2025[8](index=8&type=chunk) - Automotive electronics represented **66%** of Q2 2025 bookings, up from **59%** for the full year 2024[7](index=7&type=chunk) [Profitability and Expenses](index=2&type=section&id=Profitability%20and%20Expenses) Q2 2025 operating expenses were $3.8 million, including $480,000 in one-time costs, resulting in a net loss of $742,000 and an Adjusted EBITDA of ($437,000) Profitability and Expense Highlights | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Operating Expenses | $3.8M | $3.6M | $3.3M | | Net Loss | ($742,000) | ($382,000) | ($797,000) | | EPS (loss) | ($0.08) | ($0.04) | ($0.09) | | Adjusted EBITDA | ($437,000) | ($98,000) | $3,000 | - Q2 2025 operating expenses included approximately **$480,000** in one-time expenses for investments and transition requirements[10](index=10&type=chunk) - Excluding one-time expenses, Adjusted EBITDA for Q2 2025 would have been **$43,000**[10](index=10&type=chunk) [Balance Sheet and Liquidity](index=2&type=section&id=Balance%20Sheet%20and%20Liquidity) The company maintained a solid balance sheet with $10.0 million in cash, $15.6 million in net working capital, and no debt as of Q2 2025 - Cash balance was **$10.0 million** as of June 30, 2025[10](index=10&type=chunk) - Net working capital was **$15.6 million** on June 30, 2025[10](index=10&type=chunk) - The Company continues to have **no debt**[10](index=10&type=chunk) [Financial Statements](index=3&type=section&id=Financial%20Statements) This section presents unaudited consolidated financial statements for Q2 2025 and 2024, including the Statement of Operations, Balance Sheet, and GAAP to non-GAAP reconciliations [Consolidated Statements of Operations](index=3&type=section&id=Consolidated%20Statements%20of%20Operations) Q2 2025 net sales were $5.95 million, resulting in an operating loss of $844,000 and a net loss of $742,000, or ($0.08) per share Q2 2025 vs Q2 2024 Statement of Operations (in thousands) | Line Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net sales | $5,948 | $5,062 | | Gross margin | $2,960 | $2,757 | | Total operating expenses | $3,804 | $3,323 | | Operating income (loss) | $(844) | $(566) | | Net income (loss) | $(742) | $(797) | | Diluted earnings (loss) per share | $(0.08) | $(0.09) | [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets were $24.1 million, with $10.0 million in cash, total liabilities of $6.9 million, and stockholders' equity of $17.2 million Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $9,969 | $10,326 | | Total Current Assets | $20,627 | $21,157 | | Total Assets | $24,117 | $24,970 | | Total Current Liabilities | $5,076 | $5,072 | | Total Stockholders' Equity | $17,246 | $17,626 | [Non-GAAP Financial Measure Reconciliation](index=4&type=section&id=Non-GAAP%20Financial%20Measure%20Reconciliation) Q2 2025 GAAP net loss of $742,000 was reconciled to an Adjusted EBITDA (excluding equity compensation) of ($437,000), which would be $43,000 excluding one-time expenses Q2 2025 GAAP to Non-GAAP Reconciliation (in thousands) | Metric | Amount | | :--- | :--- | | Net Loss (GAAP) | $(742) | | EBITDA | $(687) | | Adjusted EBITDA (excl. equity comp) | $(437) | | One-time expenses/investments | $480 | | Adjusted EBITDA (excl. one-time items) | $43 | [Other Information](index=2&type=section&id=Other%20Information) This section provides investor conference call details, business information, forward-looking statement disclaimers, and clarification on non-GAAP financial measures - A conference call to discuss the financial results was scheduled for July 24, 2025, at 2 p.m. Pacific Time[11](index=11&type=chunk) - The press release contains forward-looking statements and non-GAAP financial measures, with the company stating that non-GAAP measures provide meaningful supplemental information and reconciliations are provided[13](index=13&type=chunk)[15](index=15&type=chunk)

Financial Data and Key Metrics Changes - Net sales for Q2 2025 were $5 million, down from $6.2 million in Q1 2025 but up from $5.1 million in Q2 2024 [11] - Gross margin as a percentage of sales was 49.8% in Q2 2025, compared to 51.6% in Q1 2025 and 54.5% in the prior year period [14] - Operating expenses for Q2 2025 were $3.8 million, up from $3.6 million in Q1 2025 and $3.3 million in the prior year period [17] Business Line Data and Key Metrics Changes - Automotive electronics represented 66% of Q2 2025 bookings, up from 59% for all of 2024 [12] - Consumable adapters and services accounted for 50% of total revenue in Q2 2025, providing a stable base of recurring revenue [12] Market Data and Key Metrics Changes - Asia, particularly China, showed strong performance in the EV sector of automotive electronics, while Europe and The Americas faced pressures from capital equipment spending due to tariff and trade uncertainties [12] - Q2 2025 bookings were $5.8 million, up from $4.6 million in Q1 2025 and $5.6 million in Q2 2024 [13] Company Strategy and Development Direction - The company is focusing on investing in its core programming platform to handle the increasing complexity of programming technology, particularly in memory [5] - A new universal platform is expected to be rolled out by the end of the year, aimed at reducing technical debt and improving product offerings [6] - The company plans to enhance its sales and marketing strategies and expand into new business lines, with a focus on vertical integration [19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges due to tariff and trade negotiations but noted that manufacturing operations have not been significantly impacted due to diversified supply chains [15] - The company expects improved performance in the second half of the year, driven by new product launches and increased customer engagement [10][46] Other Important Information - The company has no debt and reported a cash balance of $10 million as of June 30, 2025 [20] - Significant one-time expenses of approximately $480,000 were incurred in Q2 2025, impacting operating income and adjusted EBITDA [19] Q&A Session Summary Question: How does the $480,000 impact the P&L? - The majority of the $480,000 will hit the G&A category, including IT, finance, and HR spending [23][26] Question: What is being done to improve yield rates for UFS Flash? - The company is investing in new bench equipment and has restructured its engineering team to address technology gaps and improve yield rates [32][36] Question: What are the expectations for gross margins moving forward? - The company anticipates a broader mix of products in the second half, which should help improve margins [43][46] Question: How is the company expanding beyond automotive? - The company is focusing on lead generation from upcoming product launches and enhancing existing customer relationships to diversify its customer base [50][54] Question: What is the market opportunity for UFS and NVMe technologies? - The UFS and NVMe markets are expected to grow at a CAGR of 14%, presenting significant opportunities for the company [6][92]

Core Insights - Data I/O Corporation reported a second consecutive quarter of sequential bookings growth, indicating a positive trend in demand for its programming solutions [1][2] - The company received a significant order for automated programming systems from a leading global automotive EV supplier, valued at over $1.4 million, highlighting its competitive edge in supporting UFS 4.0 technology [2][6] - The UFS memory market is projected to grow at a CAGR of 14% over the next five years, presenting substantial opportunities for Data I/O as it prepares for next-generation high-density memory technology [5] Financial Performance - Net sales for Q2 2025 were $5.9 million, a decrease from $6.2 million in Q1 2025 but an increase from $5.1 million in Q2 2024 [6] - Bookings for Q2 2025 reached $5.8 million, up from $4.6 million in Q1 2025 and $5.6 million in Q2 2024, with a backlog of $2.8 million as of June 30, 2025 [7] - Gross margin for Q2 2025 was 49.8%, down from 51.6% in Q1 2025 and 54.5% in the prior year, attributed to a lower margin product mix [8] Operational Highlights - Operating expenses for Q2 2025 were $3.8 million, an increase from $3.6 million in Q1 2025, reflecting ongoing investments in the core programming platform and other operational needs [10] - The company reported a net loss of $742,000 or $0.08 per share for Q2 2025, compared to a net loss of $797,000 or $0.09 per share in the prior year [10] - Cash at the end of Q2 2025 was $10.0 million, slightly down from $10.3 million at the end of 2024, indicating a solid balance sheet despite one-time expenses [10]

Summary of Data I/O (DAIO) Conference Call Company Overview - **Company Name**: Data I/O Corporation - **Industry**: Semiconductor technology and programming solutions - **Founded**: 1972 - **CEO**: Bill Wentworth since October 31, 2024 - **Market Presence**: Significant market share in automotive, IoT, industrial controls, and service providers globally [3][5][6] Core Business and Technology - **Core Function**: Data I/O specializes in embedding data into programmable semiconductor technology, primarily for Fortune 500 companies [5][19] - **Technology Platforms**: - **FlashCore 3** and **Luminex** are the main platforms used for programming and embedding data into silicon [8][11] - Transitioning from the older Luminex platform to a newer version to address UFS flash technology, which is expected to grow at a CAGR of 14% over the next five years [34][35] Market Dynamics - **Automotive Sector**: - Accounts for nearly 60% of revenue, driven by increasing complexity in automotive technology [19][39] - Demand for programmable technology in vehicles is expected to grow due to advancements in autonomous driving and infotainment systems [39] - **Service Provider Network**: - Identified as a significant growth area, potentially twice the size of the automotive market [21] - Focus on global distribution companies and contract manufacturers to expand market reach [22][32] Financial Performance and Strategy - **Current Financial Status**: Approximately $10 million in cash, cash flow neutral, with expectations for growth in the second half of the year [24] - **Gross Margins**: Historically between 52-58%, with potential to reach the low 60s through improved efficiencies and service offerings [30] - **Revenue Diversification**: Plans to diversify revenue streams beyond automotive, including entering the services market, which is larger and offers recurring revenue opportunities [27][50] Product Development and Innovation - **New Product Launches**: - Two new versions of products to be released in September and November 2025, aimed at enhancing capabilities in the engineering community [16][34] - Focus on UFS flash technology to meet growing market demands [34][36] - **Use of AI**: Implementing AI to streamline engineering processes and improve operational efficiencies [25][26] Market Trends and Future Outlook - **Growth Opportunities**: - Anticipated growth in automotive and IoT sectors, with increasing demand for programmable technology [44] - Exploring organic and inorganic growth opportunities, including potential M&A [27][28] - **Service Market Potential**: The independent programming service market is estimated to be worth $200-300 million globally, presenting a significant opportunity for Data I/O [50][51] Conclusion - Data I/O is positioned to leverage its technological advancements and market presence to capture growth in the semiconductor programming industry, with a strategic focus on diversifying revenue streams and enhancing product offerings to meet evolving customer needs [51]

Group 1 - Data I/O Corporation will participate in the Singular Research Summer Solstice Conference on June 18, 2025, with a presentation scheduled for 3:00 PM ET in New York [1] - The company will also present at the iAccess Alpha Virtual Best Ideas Summer Investment Conference on June 24, 2025, at 11:30 AM ET, followed by one-on-one meetings on June 25 [2] - Data I/O has been providing innovative solutions since 1972, focusing on electronic products for various sectors including automotive, IoT, medical, and consumer electronics [3] Group 2 - The company's data provisioning solutions allow OEMs to manage device intellectual property from inception to deployment, ensuring reliable and cost-effective product development [3] - Data I/O's offerings are supported by a portfolio of patents and a global network of support professionals, enhancing customer success [3]

Financial Performance - Data I/O reported net sales of $6.2 million for Q1 2025, a 1.3% increase from $6.1 million in Q1 2024, driven by business recovery and backlog deliveries in the Americas and Europe[87]. - The company experienced a significant increase in U.S. sales, which rose by 234.5% to $756,000, while international sales decreased by 7.7% to $5.42 million, representing 88% of total net sales[86][89]. - Gross margin for Q1 2025 was $3.19 million, accounting for 51.6% of net sales, down from 52.8% in Q1 2024, primarily due to a higher mix of system sales revenue[90]. - New bookings for Q1 2025 were $4.6 million, an increase from $4.1 million in Q4 2024 but a decrease from $8.1 million in Q1 2024, influenced by delays in customer purchase decisions[88]. - The backlog as of March 31, 2025, was $2.9 million, a decrease of $0.6 million from December 31, 2024, with deferred revenue at approximately $1.5 million[88]. Operational Strategy - The company is focusing on diversifying its end markets and enhancing its consultative sales process to drive revenue growth[66]. - Data I/O has implemented a resilient supply chain with dual manufacturing capabilities in the U.S. and China, positioning itself to manage emerging tariff policies effectively[67]. - The company is considering additional manufacturing locations in Europe to further enhance its operational capabilities[67]. Economic Outlook - Despite economic uncertainties, Data I/O remains focused on sustainable growth through innovation and improving its value proposition[68]. Expenses and Income - Research and development (R&D) expenses decreased to $1,515,000 in Q1 2025, a 4.2% decline from $1,582,000 in Q1 2024, representing 24.5% of net sales compared to 25.9% in the prior year[91]. - Selling, general and administrative (SG&A) expenses fell to $2,050,000 in Q1 2025, down 17.9% from $2,498,000 in Q1 2024, accounting for 33.2% of net sales versus 41.0% previously[92]. - Interest income dropped to $38,000 in Q1 2025, a 52.5% decrease from $80,000 in Q1 2024, attributed to lower interest rates and invested balances[94]. - The income tax expense for Q1 2025 was $21,000, down 48.8% from $41,000 in Q1 2024, primarily related to foreign and state taxes[96]. Cash and Working Capital - Working capital as of March 31, 2025, was approximately $16,014,000, a slight decrease of $71,000 from $16,085,000 at the end of 2024[98]. - Cash increased to $10,500,000, up $159,000 from December 31, 2024, due to higher sales and improved cost structure[98]. EBITDA and Valuation - EBITDA for Q1 2025 was ($272,000), an improvement from ($645,000) in Q1 2024, while adjusted EBITDA was ($98,000) compared to ($364,000) in the prior year[104]. - The company maintains a valuation allowance of $8,900,000 as of March 31, 2025, due to uncertainties related to loss history and economic outlook[97]. Capital Expenditure and Debt - The company has no significant capital expenditure plans but will continue to manage expenditures to support business development and new product releases[99]. - The company has no debt and believes it has sufficient cash and working capital to fund operations and capital requirements for the next year and beyond[101].

Core Insights - Data I/O Corporation announced open-market stock purchases by insiders, including Board members and senior management, indicating confidence in the company's future growth and strategic goals [1][2] - The company's President/CEO highlighted that recent stock prices do not reflect the inherent value of the business and its growth opportunities, emphasizing alignment with shareholders [2] Company Overview - Data I/O Corporation, established in 1972, specializes in advanced security and data deployment solutions for various electronic devices, including automotive, IoT, medical, and consumer electronics [3] - The company provides data provisioning solutions that enable customers to manage device intellectual property from inception to deployment, ensuring reliable and cost-effective product development [3]

Core Insights - Data I/O Corporation has received its largest adapter order in company history, valued at nearly $1 million, from a prominent European electronics distributor, expected to be fulfilled by the end of September 2025 [1][2]. Group 1: Order Significance - The order represents a major milestone for Data I/O, marking the largest single adapter order in over 50 years of operation [2]. - This order is significant as it comes from the distribution channel market, which is a targeted area for customer expansion and revenue diversification for the company [2]. Group 2: Product and Technology - The adapters will support Data I/O's automated programming systems, known for their speed, flexibility, and cost-effectiveness [2]. - These adapters serve as a physical interface between the automated programming systems and various semiconductor devices, including microcontrollers and flash memory [2]. Group 3: Company Background - Data I/O Corporation has been developing innovative solutions since 1972, enabling the design and manufacture of electronic products across various sectors, including automotive and Internet-of-Things [3]. - The company provides data provisioning solutions that allow OEMs to program and securely provision devices from early samples to high-volume production [3].

Core Viewpoint - Data I/O Corporation held a conference call to discuss its First Quarter 2025 financial results, highlighting key financial metrics and future expectations [1][3]. Financial Performance - The conference call included presentations from the President and CEO, Bill Wentworth, and CFO, Gerry Ng, indicating a structured approach to financial reporting [3]. - The company emphasized the importance of understanding the impact of various factors on its financial performance, including global events and market conditions [4][5]. Market Conditions - The discussion acknowledged uncertainties related to global and geopolitical events, international trade regulations, and the overall activity level in the automotive and semiconductor industries [5]. - The company noted that order levels and market acceptance of new products are critical for revenue recognition, which may be influenced by economic conditions and demand fluctuations [5].